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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Need To File 2012 Taxes

Tax Forms 1040ez 2011IrsTax Forms Download Ez 1040How To Do TaxesIrs GovefileForm 1040nrTax Planning Us 1040aState Tax E FileTax Amendment Form 1040xFree State Tax DownloadsState Tax Filing OnlineTurbotax Premier Federal & State Returns Plus Federal E File 2013Income Tax PreparationState Tax Preparation FreeFree State Taxes EfileFile Free State Tax Return1040ez TaxesE File Tax ExtensionAmended State Tax FormsIrs Forms 1040nr1040 Ez Form 2014How To Amend A Tax FormEz Tax Form 20122012 State Tax FormFile Income Tax OnlineTaxact 2012 Return User1040ez Income Tax FormFile Taxes Online 1040ezHow To Ammend Your TaxesHnrblock Free Tax Form940 Tax Form 2012State Tax Forms And InstructionsBest Tax SoftwareFiling State ReturnI Need To Amend My 2010 TaxesH And R Block 1040xTelefile2012 State Income Tax FormsIrs 2009 Tax FormsAmended Tax Return Form

Need To File 2012 Taxes

Need to file 2012 taxes 1. Need to file 2012 taxes   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. Need to file 2012 taxes Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. Need to file 2012 taxes Reseller statement. Need to file 2012 taxes Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. Need to file 2012 taxes Deep-draft ocean-going vessels. Need to file 2012 taxes Passenger vessels. Need to file 2012 taxes Ocean-going barges. Need to file 2012 taxes State or local governments. Need to file 2012 taxes Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. Need to file 2012 taxes Gasoline, including aviation gasoline and gasoline blendstocks. Need to file 2012 taxes Diesel fuel, including dyed diesel fuel. Need to file 2012 taxes Diesel-water fuel emulsion. Need to file 2012 taxes Kerosene, including dyed kerosene and kerosene used in aviation. Need to file 2012 taxes Other Fuels (including alternative fuels). Need to file 2012 taxes Compressed natural gas (CNG). Need to file 2012 taxes Fuels used in commercial transportation on inland waterways. Need to file 2012 taxes Any liquid used in a fractional ownership program aircraft as fuel. Need to file 2012 taxes The following terms are used throughout the discussion of fuel taxes. Need to file 2012 taxes Other terms are defined in the discussion of the specific fuels to which they pertain. Need to file 2012 taxes Agri-biodiesel. Need to file 2012 taxes   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. Need to file 2012 taxes Approved terminal or refinery. Need to file 2012 taxes   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. Need to file 2012 taxes Biodiesel. Need to file 2012 taxes   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. Need to file 2012 taxes Blended taxable fuel. Need to file 2012 taxes   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. Need to file 2012 taxes This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Need to file 2012 taxes Blender. Need to file 2012 taxes   This is the person that produces blended taxable fuel. Need to file 2012 taxes Bulk transfer. Need to file 2012 taxes   This is the transfer of taxable fuel by pipeline or vessel. Need to file 2012 taxes Bulk transfer/terminal system. Need to file 2012 taxes   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Need to file 2012 taxes Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. Need to file 2012 taxes Cellulosic biofuel. Need to file 2012 taxes   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. Need to file 2012 taxes Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). Need to file 2012 taxes For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. Need to file 2012 taxes Also see Second generation biofuel below. Need to file 2012 taxes Diesel-water fuel emulsion. Need to file 2012 taxes   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. Need to file 2012 taxes The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Need to file 2012 taxes Dry lease aircraft exchange. Need to file 2012 taxes   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Need to file 2012 taxes Enterer. Need to file 2012 taxes   This is the importer of record (under customs law) for the taxable fuel. Need to file 2012 taxes However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. Need to file 2012 taxes If there is no importer of record, the owner at the time of entry into the United States is the enterer. Need to file 2012 taxes Entry. Need to file 2012 taxes   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. Need to file 2012 taxes This does not apply to fuel brought into Puerto Rico (which is part of the U. Need to file 2012 taxes S. Need to file 2012 taxes customs territory), but does apply to fuel brought into the United States from Puerto Rico. Need to file 2012 taxes Fractional ownership aircraft program and fractional program aircraft. Need to file 2012 taxes   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Need to file 2012 taxes Measurement of taxable fuel. Need to file 2012 taxes   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. Need to file 2012 taxes Other fuels. Need to file 2012 taxes   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. Need to file 2012 taxes Pipeline operator. Need to file 2012 taxes   This is the person that operates a pipeline within the bulk transfer/terminal system. Need to file 2012 taxes Position holder. Need to file 2012 taxes   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. Need to file 2012 taxes You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. Need to file 2012 taxes A terminal operator that owns taxable fuel in its terminal is a position holder. Need to file 2012 taxes Rack. Need to file 2012 taxes   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. Need to file 2012 taxes Refiner. Need to file 2012 taxes   This is any person that owns, operates, or otherwise controls a refinery. Need to file 2012 taxes Refinery. Need to file 2012 taxes   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. Need to file 2012 taxes However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. Need to file 2012 taxes For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. Need to file 2012 taxes Registrant. Need to file 2012 taxes   This is a taxable fuel registrant (see Registration Requirements, later). Need to file 2012 taxes Removal. Need to file 2012 taxes   This is any physical transfer of taxable fuel. Need to file 2012 taxes It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. Need to file 2012 taxes However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. Need to file 2012 taxes Renewable diesel. Need to file 2012 taxes   See Renewable Diesel Credits in chapter 2. Need to file 2012 taxes Sale. Need to file 2012 taxes   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. Need to file 2012 taxes For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. Need to file 2012 taxes Second generation biofuel. Need to file 2012 taxes   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. Need to file 2012 taxes S. Need to file 2012 taxes C. Need to file 2012 taxes 7545). Need to file 2012 taxes It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. Need to file 2012 taxes It is not alcohol of less than 150 proof (disregard any added denaturants). Need to file 2012 taxes See Form 6478 for more information. Need to file 2012 taxes State. Need to file 2012 taxes   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Need to file 2012 taxes An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. Need to file 2012 taxes Taxable fuel. Need to file 2012 taxes   This means gasoline, diesel fuel, and kerosene. Need to file 2012 taxes Terminal. Need to file 2012 taxes   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. Need to file 2012 taxes It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. Need to file 2012 taxes A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. Need to file 2012 taxes Terminal operator. Need to file 2012 taxes   This is any person that owns, operates, or otherwise controls a terminal. Need to file 2012 taxes Throughputter. Need to file 2012 taxes   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). Need to file 2012 taxes Vessel operator. Need to file 2012 taxes   This is the person that operates a vessel within the bulk transfer/terminal system. Need to file 2012 taxes However, vessel does not include a deep draft ocean-going vessel. Need to file 2012 taxes Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. Need to file 2012 taxes A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. Need to file 2012 taxes For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. Need to file 2012 taxes The returns are due the last day of the month following the month in which the transaction occurs. Need to file 2012 taxes Generally, these returns can be filed on paper or electronically. Need to file 2012 taxes For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. Need to file 2012 taxes Publication 3536 is only available on the IRS website. Need to file 2012 taxes Form 720-TO. Need to file 2012 taxes   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Need to file 2012 taxes Each terminal operator must file a separate form for each approved terminal. Need to file 2012 taxes Form 720-CS. Need to file 2012 taxes   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. Need to file 2012 taxes Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. Need to file 2012 taxes See Form 637 for other persons who must register and for more information about registration. Need to file 2012 taxes Persons that are required to be registered. Need to file 2012 taxes   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. Need to file 2012 taxes Persons that may register. Need to file 2012 taxes   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. Need to file 2012 taxes Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. Need to file 2012 taxes However, they must be registered to file claims for certain sales and uses of fuel. Need to file 2012 taxes See Form 637 for more information. Need to file 2012 taxes Taxable fuel registrant. Need to file 2012 taxes   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. Need to file 2012 taxes The term registrant as used in the discussions of these fuels means a taxable fuel registrant. Need to file 2012 taxes Additional information. Need to file 2012 taxes   See the Form 637 instructions for the information you must submit when you apply for registration. Need to file 2012 taxes Failure to register. Need to file 2012 taxes   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. Need to file 2012 taxes Gasoline and Aviation Gasoline Gasoline. Need to file 2012 taxes   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Need to file 2012 taxes Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. Need to file 2012 taxes Gasoline also includes gasoline blendstocks, discussed later. Need to file 2012 taxes Aviation gasoline. Need to file 2012 taxes   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. Need to file 2012 taxes Taxable Events The tax on gasoline is $. Need to file 2012 taxes 184 per gallon. Need to file 2012 taxes The tax on aviation gasoline is $. Need to file 2012 taxes 194 per gallon. Need to file 2012 taxes When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. Need to file 2012 taxes 141 per gallon. Need to file 2012 taxes See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. Need to file 2012 taxes Tax is imposed on the removal, entry, or sale of gasoline. Need to file 2012 taxes Each of these events is discussed later. Need to file 2012 taxes Also, see the special rules that apply to gasoline blendstocks, later. Need to file 2012 taxes If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. Need to file 2012 taxes See Refunds of Second Tax in chapter 2. Need to file 2012 taxes Removal from terminal. Need to file 2012 taxes   All removals of gasoline at a terminal rack are taxable. Need to file 2012 taxes The position holder for that gasoline is liable for the tax. Need to file 2012 taxes Two-party exchanges. Need to file 2012 taxes   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Need to file 2012 taxes A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Need to file 2012 taxes The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Need to file 2012 taxes The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. Need to file 2012 taxes The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Need to file 2012 taxes The transaction is subject to a written contract. Need to file 2012 taxes Terminal operator's liability. Need to file 2012 taxes   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Need to file 2012 taxes   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. Need to file 2012 taxes The terminal operator is a registrant. Need to file 2012 taxes The terminal operator has an unexpired notification certificate (discussed later) from the position holder. Need to file 2012 taxes The terminal operator has no reason to believe any information on the certificate is false. Need to file 2012 taxes Removal from refinery. Need to file 2012 taxes   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. Need to file 2012 taxes It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes It is made at the refinery rack. Need to file 2012 taxes The refiner is liable for the tax. Need to file 2012 taxes Exception. Need to file 2012 taxes   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. Need to file 2012 taxes The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Need to file 2012 taxes The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Need to file 2012 taxes The removal from the refinery is by railcar. Need to file 2012 taxes The same person operates the refinery and the facility at which the gasoline is received. Need to file 2012 taxes Entry into the United States. Need to file 2012 taxes   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. Need to file 2012 taxes It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes It is not made by bulk transfer. Need to file 2012 taxes The enterer is liable for the tax. Need to file 2012 taxes Importer of record's liability. Need to file 2012 taxes   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Need to file 2012 taxes   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Need to file 2012 taxes The importer of record has an unexpired notification certificate (discussed later) from the enterer. Need to file 2012 taxes The importer of record has no reason to believe any information in the certificate is false. Need to file 2012 taxes Customs bond. Need to file 2012 taxes   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Need to file 2012 taxes Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Need to file 2012 taxes   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes The position holder is liable for the tax. Need to file 2012 taxes The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Need to file 2012 taxes However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Need to file 2012 taxes Bulk transfers not received at approved terminal or refinery. Need to file 2012 taxes   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. Need to file 2012 taxes No tax was previously imposed (as discussed earlier) on any of the following events. Need to file 2012 taxes The removal from the refinery. Need to file 2012 taxes The entry into the United States. Need to file 2012 taxes The removal from a terminal by an unregistered position holder. Need to file 2012 taxes Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). Need to file 2012 taxes   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. Need to file 2012 taxes However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Need to file 2012 taxes The owner is a registrant. Need to file 2012 taxes The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. Need to file 2012 taxes The owner has no reason to believe any information on the certificate is false. Need to file 2012 taxes The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. Need to file 2012 taxes The operator is jointly and severally liable if the owner does not meet these conditions. Need to file 2012 taxes Sales to unregistered person. Need to file 2012 taxes   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Need to file 2012 taxes   The seller is liable for the tax. Need to file 2012 taxes However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Need to file 2012 taxes   The seller is a registrant. Need to file 2012 taxes The seller has an unexpired notification certificate (discussed later) from the buyer. Need to file 2012 taxes The seller has no reason to believe any information on the certificate is false. Need to file 2012 taxes The buyer of the gasoline is liable for the tax if the seller meets these conditions. Need to file 2012 taxes The buyer is jointly and severally liable if the seller does not meet these conditions. Need to file 2012 taxes Exception. Need to file 2012 taxes   The tax does not apply to a sale if all of the following apply. Need to file 2012 taxes The buyer's principal place of business is not in the United States. Need to file 2012 taxes The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Need to file 2012 taxes The seller is a registrant and the exporter of record. Need to file 2012 taxes The fuel was exported. Need to file 2012 taxes Removal or sale of blended gasoline. Need to file 2012 taxes   The removal or sale of blended gasoline by the blender is taxable. Need to file 2012 taxes See Blended taxable fuel under Definitions, earlier. Need to file 2012 taxes   The blender is liable for the tax. Need to file 2012 taxes The tax is figured on the number of gallons not previously subject to the tax on gasoline. Need to file 2012 taxes   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. Need to file 2012 taxes See Form 720 to report this tax. Need to file 2012 taxes You also must be registered with the IRS as a blender. Need to file 2012 taxes See Form 637. Need to file 2012 taxes   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Need to file 2012 taxes Notification certificate. Need to file 2012 taxes   The notification certificate is used to notify a person of the registration status of the registrant. Need to file 2012 taxes A copy of the registrant's letter of registration cannot be used as a notification certificate. Need to file 2012 taxes A model notification certificate is shown in the Appendix as Model Certificate C. Need to file 2012 taxes A notification certificate must contain all information necessary to complete the model. Need to file 2012 taxes   The certificate may be included as part of any business records normally used for a sale. Need to file 2012 taxes A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. Need to file 2012 taxes The registrant must provide a new certificate if any information on a certificate has changed. Need to file 2012 taxes Additional persons liable. Need to file 2012 taxes   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. Need to file 2012 taxes Gasoline Blendstocks Gasoline blendstocks may be subject to $. Need to file 2012 taxes 001 per gallon LUST tax as discussed below. Need to file 2012 taxes Gasoline includes gasoline blendstocks. Need to file 2012 taxes The previous discussions apply to these blendstocks. Need to file 2012 taxes However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. Need to file 2012 taxes 001 per gallon or are not subject to the excise tax. Need to file 2012 taxes Blendstocks. Need to file 2012 taxes   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. Need to file 2012 taxes   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. Need to file 2012 taxes Not used to produce finished gasoline. Need to file 2012 taxes   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. Need to file 2012 taxes Removals and entries not connected to sale. Need to file 2012 taxes   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. Need to file 2012 taxes Removals and entries connected to sale. Need to file 2012 taxes   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. Need to file 2012 taxes The person has an unexpired certificate (discussed later) from the buyer. Need to file 2012 taxes The person has no reason to believe any information in the certificate is false. Need to file 2012 taxes Sales after removal or entry. Need to file 2012 taxes   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. Need to file 2012 taxes The seller is liable for the tax. Need to file 2012 taxes However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. Need to file 2012 taxes The seller has an unexpired certificate (discussed next) from the buyer. Need to file 2012 taxes The seller has no reason to believe any information in the certificate is false. Need to file 2012 taxes Certificate of buyer. Need to file 2012 taxes   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. Need to file 2012 taxes The certificate may be included as part of any business records normally used for a sale. Need to file 2012 taxes A model certificate is shown in the Appendix as Model Certificate D. Need to file 2012 taxes The certificate must contain all information necessary to complete the model. Need to file 2012 taxes   A certificate expires on the earliest of the following dates. Need to file 2012 taxes The date 1 year after the effective date (not earlier than the date signed) of the certificate. Need to file 2012 taxes The date a new certificate is provided to the seller. Need to file 2012 taxes The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. Need to file 2012 taxes The buyer must provide a new certificate if any information on a certificate has changed. Need to file 2012 taxes   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. Need to file 2012 taxes Received at approved terminal or refinery. Need to file 2012 taxes   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. Need to file 2012 taxes The person is a registrant. Need to file 2012 taxes The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. Need to file 2012 taxes The person has no reason to believe any information on the certificate is false. Need to file 2012 taxes Bulk transfers to registered industrial user. Need to file 2012 taxes   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. Need to file 2012 taxes An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. Need to file 2012 taxes Credits or Refunds. Need to file 2012 taxes   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. Need to file 2012 taxes For more information, see chapter 2. Need to file 2012 taxes Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). Need to file 2012 taxes However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. Need to file 2012 taxes Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. Need to file 2012 taxes A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Need to file 2012 taxes A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. Need to file 2012 taxes However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Need to file 2012 taxes Diesel fuel does not include gasoline, kerosene, excluded liquid, No. Need to file 2012 taxes 5 and No. Need to file 2012 taxes 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. Need to file 2012 taxes An excluded liquid is either of the following. Need to file 2012 taxes A liquid that contains less than 4% normal paraffins. Need to file 2012 taxes A liquid with all the following properties. Need to file 2012 taxes Distillation range of 125 degrees Fahrenheit or less. Need to file 2012 taxes Sulfur content of 10 ppm or less. Need to file 2012 taxes Minimum color of +27 Saybolt. Need to file 2012 taxes Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. Need to file 2012 taxes Kerosene. Need to file 2012 taxes   This means any of the following liquids. Need to file 2012 taxes One of the two grades of kerosene (No. Need to file 2012 taxes 1-K and No. Need to file 2012 taxes 2-K) covered by ASTM specification D3699. Need to file 2012 taxes Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). Need to file 2012 taxes See Kerosene for Use in Aviation, later. Need to file 2012 taxes   However, kerosene does not include excluded liquid, discussed earlier. Need to file 2012 taxes   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. Need to file 2012 taxes Diesel-powered highway vehicle. Need to file 2012 taxes   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Need to file 2012 taxes Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. Need to file 2012 taxes For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. Need to file 2012 taxes 2) in chapter 2. Need to file 2012 taxes Diesel-powered train. Need to file 2012 taxes   This is any diesel-powered equipment or machinery that rides on rails. Need to file 2012 taxes The term includes a locomotive, work train, switching engine, and track maintenance machine. Need to file 2012 taxes Taxable Events The tax on diesel fuel and kerosene is $. Need to file 2012 taxes 244 per gallon. Need to file 2012 taxes It is imposed on the removal, entry, or sale of diesel fuel and kerosene. Need to file 2012 taxes Each of these events is discussed later. Need to file 2012 taxes Only the $. Need to file 2012 taxes 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. Need to file 2012 taxes If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. Need to file 2012 taxes See Refunds of Second Tax in chapter 2. Need to file 2012 taxes Use in certain intercity and local buses. Need to file 2012 taxes   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. Need to file 2012 taxes A claim for $. Need to file 2012 taxes 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. Need to file 2012 taxes An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. Need to file 2012 taxes The bus must be engaged in one of the following activities. Need to file 2012 taxes Scheduled transportation along regular routes regardless of the size of the bus. Need to file 2012 taxes Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). Need to file 2012 taxes A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. Need to file 2012 taxes Removal from terminal. Need to file 2012 taxes   All removals of diesel fuel and kerosene at a terminal rack are taxable. Need to file 2012 taxes The position holder for that fuel is liable for the tax. Need to file 2012 taxes Two-party exchanges. Need to file 2012 taxes   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Need to file 2012 taxes A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Need to file 2012 taxes The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Need to file 2012 taxes The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. Need to file 2012 taxes The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Need to file 2012 taxes The transaction is subject to a written contract. Need to file 2012 taxes Terminal operator's liability. Need to file 2012 taxes   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). Need to file 2012 taxes   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Need to file 2012 taxes However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. Need to file 2012 taxes The terminal operator is a registrant. Need to file 2012 taxes The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. Need to file 2012 taxes The terminal operator has no reason to believe any information on the certificate is false. Need to file 2012 taxes Removal from refinery. Need to file 2012 taxes   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. Need to file 2012 taxes It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes It is made at the refinery rack. Need to file 2012 taxes The refiner is liable for the tax. Need to file 2012 taxes Exception. Need to file 2012 taxes   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. Need to file 2012 taxes The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Need to file 2012 taxes The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Need to file 2012 taxes The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. Need to file 2012 taxes Entry into the United States. Need to file 2012 taxes   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. Need to file 2012 taxes It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes It is not made by bulk transfer. Need to file 2012 taxes The enterer is liable for the tax. Need to file 2012 taxes Importer of record's liability. Need to file 2012 taxes   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Need to file 2012 taxes   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Need to file 2012 taxes The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. Need to file 2012 taxes The importer of record has no reason to believe any information in the certificate is false. Need to file 2012 taxes Customs bond. Need to file 2012 taxes   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Need to file 2012 taxes Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Need to file 2012 taxes   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. Need to file 2012 taxes The position holder is liable for the tax. Need to file 2012 taxes The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Need to file 2012 taxes However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Need to file 2012 taxes Bulk transfers not received at approved terminal or refinery. Need to file 2012 taxes   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. Need to file 2012 taxes No tax was previously imposed (as discussed earlier) on any of the following events. Need to file 2012 taxes The removal from the refinery. Need to file 2012 taxes The entry into the United States. Need to file 2012 taxes The removal from a terminal by an unregistered position holder. Need to file 2012 taxes Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). Need to file 2012 taxes   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. Need to file 2012 taxes However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Need to file 2012 taxes The owner is a registrant. Need to file 2012 taxes The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. Need to file 2012 taxes The owner has no reason to believe any information on the certificate is false. Need to file 2012 taxes The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. Need to file 2012 taxes The operator is jointly and severally liable if the owner does not meet these conditions. Need to file 2012 taxes Sales to unregistered person. Need to file 2012 taxes   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Need to file 2012 taxes   The seller is liable for the tax. Need to file 2012 taxes However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Need to file 2012 taxes The seller is a registrant. Need to file 2012 taxes The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. Need to file 2012 taxes The seller has no reason to believe any information on the certificate is false. Need to file 2012 taxes The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. Need to file 2012 taxes The buyer is jointly and severally liable if the seller does not meet these conditions. Need to file 2012 taxes Exception. Need to file 2012 taxes   The tax does not apply to a sale if all of the following apply. Need to file 2012 taxes The buyer's principal place of business is not in the United States. Need to file 2012 taxes The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Need to file 2012 taxes The seller is a registrant and the exporter of record. Need to file 2012 taxes The fuel was exported. Need to file 2012 taxes Removal or sale of blended diesel fuel or kerosene. Need to file 2012 taxes   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Need to file 2012 taxes Blended taxable fuel produced using biodiesel is subject to the tax. Need to file 2012 taxes See Blended taxable fuel under Definitions, earlier. Need to file 2012 taxes   The blender is liable for the tax. Need to file 2012 taxes The tax is figured on the number of gallons not previously subject to the tax. Need to file 2012 taxes   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. Need to file 2012 taxes Generally, the biodiesel mixture must be diesel fuel (defined earlier). Need to file 2012 taxes See Form 720 to report this tax. Need to file 2012 taxes You also must be registered by the IRS as a blender. Need to file 2012 taxes See Form 637 for more information. Need to file 2012 taxes   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Need to file 2012 taxes Additional persons liable. Need to file 2012 taxes   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. Need to file 2012 taxes Credits or Refunds. Need to file 2012 taxes   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. Need to file 2012 taxes For more information, see chapter 2. Need to file 2012 taxes Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. Need to file 2012 taxes 001 per gallon LUST tax as discussed below, unless the fuel is for export. Need to file 2012 taxes The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. Need to file 2012 taxes The person otherwise liable for tax (for example, the position holder) is a registrant. Need to file 2012 taxes In the case of a removal from a terminal, the terminal is an approved terminal. Need to file 2012 taxes The diesel fuel or kerosene satisfies the dyeing requirements (described next). Need to file 2012 taxes Dyeing requirements. Need to file 2012 taxes   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. Need to file 2012 taxes It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. Need to file 2012 taxes 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. Need to file 2012 taxes Is indelibly dyed by mechanical injection. Need to file 2012 taxes See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. Need to file 2012 taxes Notice required. Need to file 2012 taxes   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. Need to file 2012 taxes   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. Need to file 2012 taxes   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). Need to file 2012 taxes That seller is subject to the penalty described next. Need to file 2012 taxes Penalty. Need to file 2012 taxes   A penalty is imposed on a person if any of the following situations apply. Need to file 2012 taxes Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. Need to file 2012 taxes Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. Need to file 2012 taxes The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. Need to file 2012 taxes The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. Need to file 2012 taxes   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Need to file 2012 taxes After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Need to file 2012 taxes   This penalty is in addition to any tax imposed on the fuel. Need to file 2012 taxes   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. Need to file 2012 taxes   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. Need to file 2012 taxes   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. Need to file 2012 taxes However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. Need to file 2012 taxes The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. Need to file 2012 taxes Exception to penalty. Need to file 2012 taxes   The penalty under item (3) will not apply in any of the following situations. Need to file 2012 taxes Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. Need to file 2012 taxes Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. Need to file 2012 taxes The alteration or attempted alteration occurs in an exempt area of Alaska. Need to file 2012 taxes See Removal for sale or use in Alaska, later. Need to file 2012 taxes Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. Need to file 2012 taxes Alaska and Feedstocks Tax of $. Need to file 2012 taxes 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). Need to file 2012 taxes Undyed kerosene used for feedstock purposes. Need to file 2012 taxes Removal for sale or use in Alaska. Need to file 2012 taxes   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. Need to file 2012 taxes The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. Need to file 2012 taxes The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. Need to file 2012 taxes In the case of a removal from a terminal, the terminal is an approved terminal. Need to file 2012 taxes The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. Need to file 2012 taxes   If all three of the requirements above are not met, then tax is imposed at $. Need to file 2012 taxes 244 per gallon. Need to file 2012 taxes   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Need to file 2012 taxes Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. Need to file 2012 taxes Later sales. Need to file 2012 taxes   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. Need to file 2012 taxes The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. Need to file 2012 taxes However, the sale is not taxable (other than the LUST tax at $. Need to file 2012 taxes 001 per gallon) if all the following requirements are met. Need to file 2012 taxes The fuel is sold in Alaska for certain nontaxable uses. Need to file 2012 taxes The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. Need to file 2012 taxes The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. Need to file 2012 taxes Feedstock purposes. Need to file 2012 taxes   The $. Need to file 2012 taxes 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. Need to file 2012 taxes The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. Need to file 2012 taxes In the case of a removal from a terminal, the terminal is an approved terminal. Need to file 2012 taxes Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. Need to file 2012 taxes   If all of the requirements above are not met, then tax is imposed at $. Need to file 2012 taxes 244 per gallon. Need to file 2012 taxes   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. Need to file 2012 taxes For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. Need to file 2012 taxes A feedstock user is a person that uses kerosene for a feedstock purpose. Need to file 2012 taxes A registered feedstock user is a person that has been registered by the IRS as a feedstock user. Need to file 2012 taxes See Registration Requirements, earlier. Need to file 2012 taxes Later sales. Need to file 2012 taxes   The excise tax ($. Need to file 2012 taxes 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. Need to file 2012 taxes The tax is imposed at the time of the later sale and that seller is liable for the tax. Need to file 2012 taxes Certificate. Need to file 2012 taxes   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. Need to file 2012 taxes The certificate may be included as part of any business records normally used for a sale. Need to file 2012 taxes A model certificate is shown in the Appendix as Model Certificate G. Need to file 2012 taxes Your certificate must contain all information necessary to complete the model. Need to file 2012 taxes   A certificate expires on the earliest of the following dates. Need to file 2012 taxes The date 1 year after the effective date (not earlier than the date signed) of the certificate. Need to file 2012 taxes The date the seller is provided a new certificate or notice that the current certificate is invalid. Need to file 2012 taxes The date the seller is notified the buyer's registration has been revoked or suspended. Need to file 2012 taxes   The buyer must provide a new certificate if any information on a certificate has changed. Need to file 2012 taxes Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. Need to file 2012 taxes Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. Need to file 2012 taxes Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. Need to file 2012 taxes Any liquid other than gasoline, diesel fuel, or kerosene. Need to file 2012 taxes Generally, this back-up tax is imposed at a rate of $. Need to file 2012 taxes 244 per gallon. Need to file 2012 taxes Liability for tax. Need to file 2012 taxes   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. Need to file 2012 taxes In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. Need to file 2012 taxes Exemptions from the back-up tax. Need to file 2012 taxes   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. Need to file 2012 taxes   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. Need to file 2012 taxes Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Need to file 2012 taxes A reduced tax rate of $. Need to file 2012 taxes 198 per gallon is imposed on a diesel-water fuel emulsion. Need to file 2012 taxes To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. Need to file 2012 taxes If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. Need to file 2012 taxes 244 per gallon. Need to file 2012 taxes Credits or refunds. Need to file 2012 taxes   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. Need to file 2012 taxes Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. Need to file 2012 taxes 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). Need to file 2012 taxes For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. Need to file 2012 taxes 219. Need to file 2012 taxes The rate of $. Need to file 2012 taxes 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. Need to file 2012 taxes The airport terminal does not need to be a secured airport terminal for this rate to apply. Need to file 2012 taxes However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. Need to file 2012 taxes For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. Need to file 2012 taxes 044 per gallon. Need to file 2012 taxes For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. Need to file 2012 taxes 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. Need to file 2012 taxes See Terminal located within a secured area of an airport, later. Need to file 2012 taxes In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Need to file 2012 taxes For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. Need to file 2012 taxes 001. Need to file 2012 taxes There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Need to file 2012 taxes The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. Need to file 2012 taxes See Terminal located within a secured area of an airport, later. Need to file 2012 taxes In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Need to file 2012 taxes The position holder is liable for the $. Need to file 2012 taxes 001 per gallon tax. Need to file 2012 taxes For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. Need to file 2012 taxes 141 per gallon applies. Need to file 2012 taxes Certain refueler trucks, tankers, and tank wagons treated as terminals. Need to file 2012 taxes   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. Need to file 2012 taxes Such terminal is located within an area of an airport. Need to file 2012 taxes Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. Need to file 2012 taxes Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. Need to file 2012 taxes The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. Need to file 2012 taxes Information reporting will be required by terminal operators regarding this provision. Need to file 2012 taxes Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. Need to file 2012 taxes Terminal located within a secured area of an airport. Need to file 2012 taxes   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. Need to file 2012 taxes This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. Need to file 2012 taxes Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. Need to file 2012 taxes 044 per gallon. Need to file 2012 taxes However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). Need to file 2012 taxes For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. Need to file 2012 taxes For the aircraft operator to be liable for the tax $. Need to file 2012 taxes 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. Need to file 2012 taxes Commercial aviation. Need to file 2012 taxes   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. Need to file 2012 taxes However, commercial aviation does not include any of the following uses. Need to file 2012 taxes Any use exclusively for the purpose of skydiving. Need to file 2012 taxes Certain air transportation by seaplane. Need to file 2012 taxes See Seaplanes under Transportation of Persons by Air in chapter 4. Need to file 2012 taxes Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. Need to file 2012 taxes For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. Need to file 2012 taxes Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. Need to file 2012 taxes For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. Need to file 2012 taxes Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. Need to file 2012 taxes See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. Need to file 2012 taxes Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. Need to file 2012 taxes 141 per gallon. Need to file 2012 taxes The fractional ownership program manager is liable for the tax. Need to file 2012 taxes The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. Need to file 2012 taxes If the surtax is imposed, the following air transportation taxes do not apply. Need to file 2012 taxes Transportation of persons by air. Need to file 2012 taxes Transportation of property by air. Need to file 2012 taxes Use of international air travel facilities. Need to file 2012 taxes These taxes are described under Air Transportation Taxes, later. Need to file 2012 taxes A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. Need to file 2012 taxes Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. Need to file 2012 taxes Fractional program aircraft. Need to file 2012 taxes   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. Need to file 2012 taxes S. Need to file 2012 taxes   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. Need to file 2012 taxes In such situations, the flight is not commercial aviation. Need to file 2012 taxes Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. Need to file 2012 taxes Fractional owner. Need to file 2012 taxes   Any person owning any interest (including the entire interest) in a fractional program aircraft. Need to file 2012 taxes Dry lease aircraft exchange. Need to file 2012 taxes   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. Need to file 2012 taxes Special rule relating to deadhead service. Need to file 2012 taxes   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. Need to file 2012 taxes More information. Need to file 2012 taxes   See section 4043 for more information on the surtax. Need to file 2012 taxes Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. Need to file 2012 taxes Certificate. Need to file 2012 taxes   The certificate may be included as part of any business records normally used for a sale. Need to file 2012 taxes See Model Certificate K in the Appendix. Need to file 2012 taxes   A certificate expires on the earliest of the following dates. Need to file 2012 taxes The date 1 year after the effective date (not earlier than the date signed) of the certificate. Need to file 2012 taxes The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. Need to file 2012 taxes The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. Need to file 2012 taxes   The buyer must provide a new certificate if any information on a certificate has changed. Need to file 2012 taxes   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. Need to file 2012 taxes Exempt use. Need to file 2012 taxes   The rate on kerosene for use in aviation is $. Need to file 2012 taxes 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. Need to file 2012 taxes An exempt use includes kerosene for the exclusive use of a state or local government. Need to file 2012 taxes There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Need to file 2012 taxes Flash title transaction. Need to file 2012 taxes   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. Need to file 2012 taxes In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. Need to file 2012 taxes In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. Need to file 2012 taxes Reseller statement. Need to file 2012 taxes   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. Need to file 2012 taxes Credits or Refunds. Need to file 2012 taxes   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). Need to file 2012 taxes A claim may be made by a registered ultimate vendor for certain sales. Need to file 2012 taxes For more information, see chapter 2. Need to file 2012 taxes Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. Need to file 2012 taxes Other Fuels include alternative fuels. Need to file 2012 taxes Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. Need to file 2012 taxes Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. Need to file 2012 taxes Qualified methanol and ethanol fuels. Need to file 2012 taxes   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. Need to file 2012 taxes The tax rates are listed in the Instructions for Form 720. Need to file 2012 taxes Partially exempt methanol and ethanol fuels. Need to file 2012 taxes   A reduced tax rate applies to these fuels. Need to file 2012 taxes Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. Need to file 2012 taxes The tax rates are listed in the Instructions for Form 720. Need to file 2012 taxes Motor vehicles. Need to file 2012 taxes   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. Need to file 2012 taxes They are propelled by a motor. Need to file 2012 taxes They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t
Español

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 and Antitrust Division
Gateway Professional Center
1050 E. Interstate Ave., Suite 200
Bismarck, ND 58503-5574

Phone Number: 701-328-3404

Toll-free: 1-800-472-2600

TTY: 1-800-366-6888

Back to Top

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 Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
2000 Schafer St., Suite G
Bismarck, ND 58501-1204

Phone Number: 701-328-9933

TTY: 1-800-366-6888 (ND)

Back to Top

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.

Insurance Department

Website: Insurance Department

Address: Insurance Department
600 E. Boulevard Ave.
Bismarck, ND 58505-0320

Phone Number: 701-328-2440

Toll-free: 1-800-247-0560 (ND)

TTY: 1-800-366-6888

Back to Top

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.

Securities Department

Website: Securities Department

Address: Securities Department
State Capitol
600 E. Boulevard Ave., 5th Floor
Bismarck, ND 58505-0510

Phone Number: 701-328-2910

Toll-free: 1-800-297-5124 (ND)

Back to Top

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
600 E. Boulevard Ave., Dept. 408
Bismarck, ND 58505-0480

Phone Number: 701-328-2400

Toll-free: 1-877-245-6685

TTY: 1-800-366-6888 (ND)

Back to Top

The Need To File 2012 Taxes

Need to file 2012 taxes 1. Need to file 2012 taxes   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. Need to file 2012 taxes Amount realized on a recourse debt. Need to file 2012 taxes 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. Need to file 2012 taxes S. Need to file 2012 taxes Individual Income Tax Return 1040X Amended U. Need to file 2012 taxes S. Need to file 2012 taxes 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. Need to file 2012 taxes However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Need to file 2012 taxes See chapter 5 for information about getting publications and forms. Need to file 2012 taxes Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Need to file 2012 taxes An exchange is a transfer of property for other property or services. Need to file 2012 taxes The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Need to file 2012 taxes Sale or lease. Need to file 2012 taxes    Some agreements that seem to be leases may really be conditional sales contracts. Need to file 2012 taxes The intention of the parties to the agreement can help you distinguish between a sale and a lease. Need to file 2012 taxes   There is no test or group of tests to prove what the parties intended when they made the agreement. Need to file 2012 taxes You should consider each agreement based on its own facts and circumstances. Need to file 2012 taxes For more information, see chapter 3 in Publication 535, Business Expenses. Need to file 2012 taxes Cancellation of a lease. Need to file 2012 taxes    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Need to file 2012 taxes 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. Need to file 2012 taxes Copyright. Need to file 2012 taxes    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. Need to file 2012 taxes 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. Need to file 2012 taxes Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Need to file 2012 taxes   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. Need to file 2012 taxes For more information, see Section 1231 Gains and Losses in chapter 3. Need to file 2012 taxes Easement. Need to file 2012 taxes   The amount received for granting an easement is subtracted from the basis of the property. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes   Any amount received that is more than the basis to be reduced is a taxable gain. Need to file 2012 taxes The transaction is reported as a sale of property. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes See Gain or Loss From Condemnations, later. Need to file 2012 taxes Property transferred to satisfy debt. Need to file 2012 taxes   A transfer of property to satisfy a debt is an exchange. Need to file 2012 taxes Note's maturity date extended. Need to file 2012 taxes   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Need to file 2012 taxes Also, it is not considered a closed and completed transaction that would result in a gain or loss. Need to file 2012 taxes 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. Need to file 2012 taxes Each case must be determined by its own facts. Need to file 2012 taxes For more information, see Regulations section 1. Need to file 2012 taxes 1001-3. Need to file 2012 taxes Transfer on death. Need to file 2012 taxes   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. Need to file 2012 taxes No taxable gain or deductible loss results from the transfer. Need to file 2012 taxes Bankruptcy. Need to file 2012 taxes   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Need to file 2012 taxes Consequently, the transfer generally does not result in gain or loss. Need to file 2012 taxes For more information, see Publication 908, Bankruptcy Tax Guide. Need to file 2012 taxes Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Need to file 2012 taxes A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Need to file 2012 taxes A loss is the adjusted basis of the property that is more than the amount you realize. Need to file 2012 taxes   Table 1-1. Need to file 2012 taxes How To Figure Whether You Have a Gain or Loss IF your. Need to file 2012 taxes . Need to file 2012 taxes . Need to file 2012 taxes THEN you have a. Need to file 2012 taxes . Need to file 2012 taxes . Need to file 2012 taxes Adjusted basis is more than the amount realized, Loss. Need to file 2012 taxes Amount realized is more than the adjusted basis, Gain. Need to file 2012 taxes Basis. Need to file 2012 taxes   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Need to file 2012 taxes The basis of property you buy is usually its cost. Need to file 2012 taxes 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. Need to file 2012 taxes See Basis Other Than Cost in Publication 551, Basis of Assets. Need to file 2012 taxes 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. Need to file 2012 taxes See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Need to file 2012 taxes Adjusted basis. Need to file 2012 taxes   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Need to file 2012 taxes Increases include costs of any improvements having a useful life of more than 1 year. Need to file 2012 taxes Decreases include depreciation and casualty losses. Need to file 2012 taxes For more details and additional examples, see Adjusted Basis in Publication 551. Need to file 2012 taxes Amount realized. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes Fair market value. Need to file 2012 taxes   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. Need to file 2012 taxes If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Need to file 2012 taxes If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Need to file 2012 taxes Example. Need to file 2012 taxes You used a building in your business that cost you $70,000. Need to file 2012 taxes You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Need to file 2012 taxes You sold the building for $100,000 plus property having an FMV of $20,000. Need to file 2012 taxes The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Need to file 2012 taxes The selling expenses were $4,000. Need to file 2012 taxes Your gain on the sale is figured as follows. Need to file 2012 taxes 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. Need to file 2012 taxes   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Need to file 2012 taxes Recognized gains must be included in gross income. Need to file 2012 taxes Recognized losses are deductible from gross income. Need to file 2012 taxes However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Need to file 2012 taxes See Nontaxable Exchanges, later. Need to file 2012 taxes 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. Need to file 2012 taxes Interest in property. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes Your basis in the property is disregarded. Need to file 2012 taxes This rule does not apply if all interests in the property are disposed of at the same time. Need to file 2012 taxes Example 1. Need to file 2012 taxes Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Need to file 2012 taxes You decide to sell your life interest in the farm. Need to file 2012 taxes The entire amount you receive is a recognized gain. Need to file 2012 taxes Your basis in the farm is disregarded. Need to file 2012 taxes Example 2. Need to file 2012 taxes The facts are the same as in Example 1, except that your brother joins you in selling the farm. Need to file 2012 taxes The entire interest in the property is sold, so your basis in the farm is not disregarded. Need to file 2012 taxes Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Need to file 2012 taxes Canceling a sale of real property. Need to file 2012 taxes   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. Need to file 2012 taxes If the buyer returns the property in the year of sale, no gain or loss is recognized. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes When the property is returned in a later year, you acquire a new basis in the property. Need to file 2012 taxes That basis is equal to the amount you pay to the buyer. Need to file 2012 taxes 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. Need to file 2012 taxes You have a gain if the amount realized is more than your adjusted basis in the property. Need to file 2012 taxes However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Need to file 2012 taxes Bargain sales to charity. Need to file 2012 taxes   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Need to file 2012 taxes 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. Need to file 2012 taxes The adjusted basis of the part sold is figured as follows. Need to file 2012 taxes 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. Need to file 2012 taxes This allocation rule does not apply if a charitable contribution deduction is not allowable. Need to file 2012 taxes   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Need to file 2012 taxes Example. Need to file 2012 taxes 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. Need to file 2012 taxes Your adjusted basis in the property is $4,000. Need to file 2012 taxes Your gain on the sale is $1,200, figured as follows. Need to file 2012 taxes 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. Need to file 2012 taxes You must subtract depreciation you took or could have taken from the basis of the business or rental part. Need to file 2012 taxes However, see the special rule below for a home used partly for business or rental. Need to file 2012 taxes You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Need to file 2012 taxes 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. Need to file 2012 taxes Any gain on the personal part of the property is a capital gain. Need to file 2012 taxes You cannot deduct a loss on the personal part. Need to file 2012 taxes Home used partly for business or rental. Need to file 2012 taxes    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. Need to file 2012 taxes See Property Used Partly for Business or Rental, in Publication 523. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes Figure the loss you can deduct as follows. Need to file 2012 taxes Use the lesser of the property's adjusted basis or fair market value at the time of the change. Need to file 2012 taxes Add to (1) the cost of any improvements and other increases to basis since the change. Need to file 2012 taxes Subtract from (2) depreciation and any other decreases to basis since the change. Need to file 2012 taxes Subtract the amount you realized on the sale from the result in (3). Need to file 2012 taxes If the amount you realized is more than the result in (3), treat this result as zero. Need to file 2012 taxes The result in (4) is the loss you can deduct. Need to file 2012 taxes Example. Need to file 2012 taxes You changed your main home to rental property 5 years ago. Need to file 2012 taxes At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Need to file 2012 taxes This year, you sold the property for $55,000. Need to file 2012 taxes You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes   If you have a gain on the sale, you generally must recognize the full amount of the gain. Need to file 2012 taxes You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Need to file 2012 taxes   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. Need to file 2012 taxes However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Need to file 2012 taxes   For more information, see Business Use or Rental of Home in Publication 523. Need to file 2012 taxes In addition, special rules apply if the home sold was acquired in a like-kind exchange. Need to file 2012 taxes See Special Situations in Publication 523. Need to file 2012 taxes Also see Like-Kind Exchanges, later. Need to file 2012 taxes Abandonments The abandonment of property is a disposition of property. Need to file 2012 taxes 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. Need to file 2012 taxes Generally, abandonment is not treated as a sale or exchange of the property. Need to file 2012 taxes If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Need to file 2012 taxes If your adjusted basis is more than the amount you realize (if any), then you have a loss. Need to file 2012 taxes Loss from abandonment of business or investment property is deductible as a loss. Need to file 2012 taxes A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Need to file 2012 taxes This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Need to file 2012 taxes If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Need to file 2012 taxes The abandonment loss is deducted in the tax year in which the loss is sustained. Need to file 2012 taxes If the abandoned property is secured by debt, special rules apply. Need to file 2012 taxes 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). Need to file 2012 taxes For more information, including examples, see chapter 3 of Publication 4681. Need to file 2012 taxes You cannot deduct any loss from abandonment of your home or other property held for personal use only. Need to file 2012 taxes Cancellation of debt. Need to file 2012 taxes   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. Need to file 2012 taxes This income is separate from any loss realized from abandonment of the property. Need to file 2012 taxes   You must report this income on your tax return unless one of the following applies. Need to file 2012 taxes The cancellation is intended as a gift. Need to file 2012 taxes The debt is qualified farm debt. Need to file 2012 taxes The debt is qualified real property business debt. Need to file 2012 taxes You are insolvent or bankrupt. Need to file 2012 taxes The debt is qualified principal residence indebtedness. Need to file 2012 taxes File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Need to file 2012 taxes For more information, including other exceptions and exclusion, see Publication 4681. Need to file 2012 taxes Forms 1099-A and 1099-C. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Need to file 2012 taxes 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. Need to file 2012 taxes The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Need to file 2012 taxes This is true even if you voluntarily return the property to the lender. Need to file 2012 taxes You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Need to file 2012 taxes Buyer's (borrower's) gain or loss. Need to file 2012 taxes   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. Need to file 2012 taxes The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Need to file 2012 taxes See Gain or Loss From Sales and Exchanges, earlier. Need to file 2012 taxes You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Need to file 2012 taxes Amount realized on a nonrecourse debt. Need to file 2012 taxes   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. Need to file 2012 taxes The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Need to file 2012 taxes Example 1. Need to file 2012 taxes Chris bought a new car for $15,000. Need to file 2012 taxes He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Need to file 2012 taxes Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Need to file 2012 taxes The credit company repossessed the car because he stopped making loan payments. Need to file 2012 taxes The balance due after taking into account the payments Chris made was $10,000. Need to file 2012 taxes The fair market value of the car when repossessed was $9,000. Need to file 2012 taxes The amount Chris realized on the repossession is $10,000. Need to file 2012 taxes 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. Need to file 2012 taxes Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Need to file 2012 taxes He has a $5,000 nondeductible loss. Need to file 2012 taxes Example 2. Need to file 2012 taxes Abena paid $200,000 for her home. Need to file 2012 taxes She paid $15,000 down and borrowed the remaining $185,000 from a bank. Need to file 2012 taxes Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Need to file 2012 taxes The bank foreclosed on the loan because Abena stopped making payments. Need to file 2012 taxes 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. Need to file 2012 taxes The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Need to file 2012 taxes She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Need to file 2012 taxes She has a $5,000 realized gain. Need to file 2012 taxes Amount realized on a recourse debt. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes The amount realized does not include the canceled debt that is your income from cancellation of debt. Need to file 2012 taxes See Cancellation of debt, below. Need to file 2012 taxes Seller's (lender's) gain or loss on repossession. Need to file 2012 taxes   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. Need to file 2012 taxes For more information, see Repossession in Publication 537. Need to file 2012 taxes    Table 1-2. Need to file 2012 taxes Worksheet for Foreclosures and Repossessions Part 1. Need to file 2012 taxes Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Need to file 2012 taxes Complete this part only  if you were personally liable for the debt. Need to file 2012 taxes Otherwise,  go to Part 2. Need to file 2012 taxes   1. Need to file 2012 taxes 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. Need to file 2012 taxes Enter the fair market value of the transferred property   3. Need to file 2012 taxes Ordinary income from cancellation of debt upon foreclosure or    repossession. Need to file 2012 taxes * Subtract line 2 from line 1. Need to file 2012 taxes   If less than zero, enter zero   Part 2. Need to file 2012 taxes Figure your gain or loss from foreclosure or repossession. Need to file 2012 taxes   4. Need to file 2012 taxes If you completed Part 1, enter the smaller of line 1 or line 2. Need to file 2012 taxes   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Need to file 2012 taxes Enter any proceeds you received from the foreclosure sale   6. Need to file 2012 taxes Add lines 4 and 5   7. Need to file 2012 taxes Enter the adjusted basis of the transferred property   8. Need to file 2012 taxes Gain or loss from foreclosure or repossession. Need to file 2012 taxes Subtract line 7  from line 6   * The income may not be taxable. Need to file 2012 taxes See Cancellation of debt. Need to file 2012 taxes Cancellation of debt. Need to file 2012 taxes   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. Need to file 2012 taxes This income is separate from any gain or loss realized from the foreclosure or repossession. Need to file 2012 taxes Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Need to file 2012 taxes    You can use Table 1-2 to figure your income from cancellation of debt. Need to file 2012 taxes   You must report this income on your tax return unless one of the following applies. Need to file 2012 taxes The cancellation is intended as a gift. Need to file 2012 taxes The debt is qualified farm debt. Need to file 2012 taxes The debt is qualified real property business debt. Need to file 2012 taxes You are insolvent or bankrupt. Need to file 2012 taxes The debt is qualified principal residence indebtedness. Need to file 2012 taxes File Form 982 to report the income exclusion. Need to file 2012 taxes Example 1. Need to file 2012 taxes 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). Need to file 2012 taxes In this case, the amount he realizes is $9,000. Need to file 2012 taxes This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Need to file 2012 taxes Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Need to file 2012 taxes He has a $6,000 nondeductible loss. Need to file 2012 taxes He also is treated as receiving ordinary income from cancellation of debt. Need to file 2012 taxes That income is $1,000 ($10,000 − $9,000). Need to file 2012 taxes This is the part of the canceled debt not included in the amount realized. Need to file 2012 taxes Example 2. Need to file 2012 taxes 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). Need to file 2012 taxes In this case, the amount she realizes is $170,000. Need to file 2012 taxes This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Need to file 2012 taxes Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Need to file 2012 taxes She has a $5,000 nondeductible loss. Need to file 2012 taxes She also is treated as receiving ordinary income from cancellation of debt. Need to file 2012 taxes (The debt is not exempt from tax as discussed under Cancellation of debt, above. Need to file 2012 taxes ) That income is $10,000 ($180,000 − $170,000). Need to file 2012 taxes This is the part of the canceled debt not included in the amount realized. Need to file 2012 taxes Forms 1099-A and 1099-C. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Need to file 2012 taxes 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. Need to file 2012 taxes Involuntary conversions are also called involuntary exchanges. Need to file 2012 taxes Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Need to file 2012 taxes You report the gain or deduct the loss on your tax return for the year you realize it. Need to file 2012 taxes 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. Need to file 2012 taxes However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Need to file 2012 taxes Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Need to file 2012 taxes Your basis for the new property is the same as your basis for the converted property. Need to file 2012 taxes This means that the gain is deferred until a taxable sale or exchange occurs. Need to file 2012 taxes 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. Need to file 2012 taxes This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Need to file 2012 taxes If you have a gain or loss from the destruction or theft of property, see Publication 547. Need to file 2012 taxes Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Need to file 2012 taxes 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. Need to file 2012 taxes The owner receives a condemnation award (money or property) in exchange for the property taken. Need to file 2012 taxes A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Need to file 2012 taxes Example. Need to file 2012 taxes A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Need to file 2012 taxes After the local government took action to condemn your property, you went to court to keep it. Need to file 2012 taxes But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Need to file 2012 taxes This is a condemnation of private property for public use. Need to file 2012 taxes Threat of condemnation. Need to file 2012 taxes   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. Need to file 2012 taxes You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes Reports of condemnation. Need to file 2012 taxes   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. Need to file 2012 taxes You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Need to file 2012 taxes 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. Need to file 2012 taxes Example. Need to file 2012 taxes Your property lies along public utility lines. Need to file 2012 taxes The utility company has the authority to condemn your property. Need to file 2012 taxes The company informs you that it intends to acquire your property by negotiation or condemnation. Need to file 2012 taxes A threat of condemnation exists when you receive the notice. Need to file 2012 taxes Related property voluntarily sold. Need to file 2012 taxes   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. Need to file 2012 taxes A substantial economic relationship exists if together the properties were one economic unit. Need to file 2012 taxes You also must show that the condemned property could not reasonably or adequately be replaced. Need to file 2012 taxes You can elect to postpone reporting the gain by buying replacement property. Need to file 2012 taxes See Postponement of Gain, later. Need to file 2012 taxes 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. Need to file 2012 taxes If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Need to file 2012 taxes You can postpone reporting gain from a condemnation if you buy replacement property. Need to file 2012 taxes 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. Need to file 2012 taxes See Postponement of Gain, later. Need to file 2012 taxes If your net condemnation award is less than your adjusted basis, you have a loss. Need to file 2012 taxes If your loss is from property you held for personal use, you cannot deduct it. Need to file 2012 taxes You must report any deductible loss in the tax year it happened. Need to file 2012 taxes You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Need to file 2012 taxes Main home condemned. Need to file 2012 taxes   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. Need to file 2012 taxes You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Need to file 2012 taxes For information on this exclusion, see Publication 523. Need to file 2012 taxes 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. Need to file 2012 taxes See Postponement of Gain, later. Need to file 2012 taxes Table 1-3. Need to file 2012 taxes Worksheet for Condemnations Part 1. Need to file 2012 taxes Gain from severance damages. Need to file 2012 taxes  If you did not receive severance damages, skip Part 1 and go to Part 2. Need to file 2012 taxes   1. Need to file 2012 taxes Enter gross severance damages received   2. Need to file 2012 taxes Enter your expenses in getting severance damages   3. Need to file 2012 taxes Subtract line 2 from line 1. Need to file 2012 taxes If less than zero, enter -0-   4. Need to file 2012 taxes Enter any special assessment on remaining property taken out of your award   5. Need to file 2012 taxes Net severance damages. Need to file 2012 taxes Subtract line 4 from line 3. Need to file 2012 taxes If less than zero, enter -0-   6. Need to file 2012 taxes Enter the adjusted basis of the remaining property   7. Need to file 2012 taxes Gain from severance damages. Need to file 2012 taxes Subtract line 6 from line 5. Need to file 2012 taxes If less than zero, enter -0-   8. Need to file 2012 taxes Refigured adjusted basis of the remaining property. Need to file 2012 taxes Subtract line 5 from line 6. Need to file 2012 taxes If less than zero, enter -0-   Part 2. Need to file 2012 taxes Gain or loss from condemnation award. Need to file 2012 taxes   9. Need to file 2012 taxes Enter the gross condemnation award received   10. Need to file 2012 taxes Enter your expenses in getting the condemnation award   11. Need to file 2012 taxes If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Need to file 2012 taxes If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Need to file 2012 taxes Otherwise, enter -0-   12. Need to file 2012 taxes Add lines 10 and 11   13. Need to file 2012 taxes Net condemnation award. Need to file 2012 taxes Subtract line 12 from line 9   14. Need to file 2012 taxes Enter the adjusted basis of the condemned property   15. Need to file 2012 taxes Gain from condemnation award. Need to file 2012 taxes If line 14 is more than line 13, enter -0-. Need to file 2012 taxes Otherwise, subtract line 14 from  line 13 and skip line 16   16. Need to file 2012 taxes Loss from condemnation award. Need to file 2012 taxes Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Need to file 2012 taxes )   Part 3. Need to file 2012 taxes Postponed gain from condemnation. Need to file 2012 taxes  (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. Need to file 2012 taxes )   17. Need to file 2012 taxes If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Need to file 2012 taxes Otherwise, enter -0-   18. Need to file 2012 taxes If line 15 is more than zero, enter the amount from line 13. Need to file 2012 taxes Otherwise, enter -0-   19. Need to file 2012 taxes Add lines 17 and 18. Need to file 2012 taxes If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Need to file 2012 taxes Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Need to file 2012 taxes Subtract line 20 from line 19. Need to file 2012 taxes If less than zero, enter -0-   22. Need to file 2012 taxes If you completed Part 1, add lines 7 and 15. Need to file 2012 taxes Otherwise, enter the amount from line 15. Need to file 2012 taxes If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Need to file 2012 taxes Recognized gain. Need to file 2012 taxes Enter the smaller of line 21 or line 22. Need to file 2012 taxes   24. Need to file 2012 taxes Postponed gain. Need to file 2012 taxes Subtract line 23 from line 22. Need to file 2012 taxes If less than zero, enter -0-   Condemnation award. Need to file 2012 taxes   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Need to file 2012 taxes The award is also the amount you are paid for the sale of your property under threat of condemnation. Need to file 2012 taxes Payment of your debts. Need to file 2012 taxes   Amounts taken out of the award to pay your debts are considered paid to you. Need to file 2012 taxes 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. Need to file 2012 taxes Example. Need to file 2012 taxes The state condemned your property for public use. Need to file 2012 taxes The award was set at $200,000. Need to file 2012 taxes The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Need to file 2012 taxes You are considered to have received the entire $200,000 as a condemnation award. Need to file 2012 taxes Interest on award. Need to file 2012 taxes   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Need to file 2012 taxes You must report the interest separately as ordinary income. Need to file 2012 taxes Payments to relocate. Need to file 2012 taxes   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. Need to file 2012 taxes Do not include them in your income. Need to file 2012 taxes Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Need to file 2012 taxes Net condemnation award. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes This is discussed later under Special assessment taken out of award. Need to file 2012 taxes Severance damages. Need to file 2012 taxes    Severance damages are not part of the award paid for the property condemned. Need to file 2012 taxes 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. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes   The contracting parties should agree on the specific amount of severance damages in writing. Need to file 2012 taxes If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Need to file 2012 taxes   You cannot make a completely new allocation of the total award after the transaction is completed. Need to file 2012 taxes However, you can show how much of the award both parties intended for severance damages. Need to file 2012 taxes The severance damages part of the award is determined from all the facts and circumstances. Need to file 2012 taxes Example. Need to file 2012 taxes You sold part of your property to the state under threat of condemnation. Need to file 2012 taxes The contract you and the condemning authority signed showed only the total purchase price. Need to file 2012 taxes It did not specify a fixed sum for severance damages. Need to file 2012 taxes However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Need to file 2012 taxes You may treat this part as severance damages. Need to file 2012 taxes Treatment of severance damages. Need to file 2012 taxes   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Need to file 2012 taxes Use them to reduce the basis of the remaining property. Need to file 2012 taxes 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. Need to file 2012 taxes   If your net severance damages are more than the basis of your retained property, you have a gain. Need to file 2012 taxes You may be able to postpone reporting the gain. Need to file 2012 taxes See Postponement of Gain, later. Need to file 2012 taxes    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. Need to file 2012 taxes Net severance damages. Need to file 2012 taxes   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Need to file 2012 taxes 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. Need to file 2012 taxes The balance is your net severance damages. Need to file 2012 taxes Expenses of obtaining a condemnation award and severance damages. Need to file 2012 taxes   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Need to file 2012 taxes Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Need to file 2012 taxes If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Need to file 2012 taxes Example. Need to file 2012 taxes You receive a condemnation award and severance damages. Need to file 2012 taxes One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Need to file 2012 taxes You had legal expenses for the entire condemnation proceeding. Need to file 2012 taxes You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Need to file 2012 taxes You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Need to file 2012 taxes Special assessment retained out of award. Need to file 2012 taxes   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. Need to file 2012 taxes An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Need to file 2012 taxes Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Need to file 2012 taxes   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Need to file 2012 taxes Example. Need to file 2012 taxes To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Need to file 2012 taxes You were awarded $5,000 for this and spent $300 to get the award. Need to file 2012 taxes Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Need to file 2012 taxes The city then paid you only $4,300. Need to file 2012 taxes Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Need to file 2012 taxes 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). Need to file 2012 taxes The net award would not change, even if you later paid the assessment from the amount you received. Need to file 2012 taxes Severance damages received. Need to file 2012 taxes   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. Need to file 2012 taxes Any balance of the special assessment is used to reduce the condemnation award. Need to file 2012 taxes Example. Need to file 2012 taxes You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Need to file 2012 taxes You spent $300 to obtain the severance damages. Need to file 2012 taxes A special assessment of $800 was retained out of the award. Need to file 2012 taxes The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Need to file 2012 taxes Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Need to file 2012 taxes Part business or rental. Need to file 2012 taxes   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. Need to file 2012 taxes Figure your gain or loss separately because gain or loss on each part may be treated differently. Need to file 2012 taxes   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. Need to file 2012 taxes Example. Need to file 2012 taxes You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Need to file 2012 taxes You rented half the building and lived in the other half. Need to file 2012 taxes You paid $25,000 for the building and spent an additional $1,000 for a new roof. Need to file 2012 taxes You claimed allowable depreciation of $4,600 on the rental half. Need to file 2012 taxes You spent $200 in legal expenses to obtain the condemnation award. Need to file 2012 taxes Figure your gain or loss as follows. Need to file 2012 taxes     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. Need to file 2012 taxes 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. Need to file 2012 taxes Your basis for the new property is the same as your basis for the old. Need to file 2012 taxes Money or unlike property received. Need to file 2012 taxes   You ordinarily must report the gain if you receive money or unlike property. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes See Controlling interest in a corporation, later. Need to file 2012 taxes   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Need to file 2012 taxes 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. Need to file 2012 taxes   The basis of the replacement property is its cost, reduced by the postponed gain. Need to file 2012 taxes 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. Need to file 2012 taxes See Controlling interest in a corporation, later. Need to file 2012 taxes You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Need to file 2012 taxes Postponing gain on severance damages. Need to file 2012 taxes   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. Need to file 2012 taxes See Treatment of severance damages, earlier. Need to file 2012 taxes 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). Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Need to file 2012 taxes Postponing gain on the sale of related property. Need to file 2012 taxes   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. Need to file 2012 taxes You must meet the requirements explained earlier under Related property voluntarily sold. Need to file 2012 taxes 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). Need to file 2012 taxes Buying replacement property from a related person. Need to file 2012 taxes   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Need to file 2012 taxes For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Need to file 2012 taxes   This rule applies to the following taxpayers. Need to file 2012 taxes C corporations. Need to file 2012 taxes Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Need to file 2012 taxes 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. Need to file 2012 taxes   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Need to file 2012 taxes If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Need to file 2012 taxes If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Need to file 2012 taxes Exception. Need to file 2012 taxes   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Need to file 2012 taxes Advance payment. Need to file 2012 taxes   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). Need to file 2012 taxes Replacement property. Need to file 2012 taxes   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Need to file 2012 taxes You do not have to use the actual funds from the condemnation award to acquire the replacement property. Need to file 2012 taxes Property you acquire by gift or inheritance does not qualify as replacement property. Need to file 2012 taxes Similar or related in service or use. Need to file 2012 taxes   Your replacement property must be similar or related in service or use to the property it replaces. Need to file 2012 taxes   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. Need to file 2012 taxes For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Need to file 2012 taxes Owner-user. Need to file 2012 taxes   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. Need to file 2012 taxes Example. Need to file 2012 taxes Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Need to file 2012 taxes Your replacement property is not similar or related in service or use to the condemned property. Need to file 2012 taxes To be similar or related in service or use, your replacement property must also be used by you as your home. Need to file 2012 taxes Owner-investor. Need to file 2012 taxes   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. Need to file 2012 taxes You decide this by determining all the following information. Need to file 2012 taxes Whether the properties are of similar service to you. Need to file 2012 taxes The nature of the business risks connected with the properties. Need to file 2012 taxes What the properties demand of you in the way of management, service, and relations to your tenants. Need to file 2012 taxes Example. Need to file 2012 taxes You owned land and a building you rented to a manufacturing company. Need to file 2012 taxes The building was condemned. Need to file 2012 taxes During the replacement period, you had a new building built on other land you already owned. Need to file 2012 taxes You rented out the new building for use as a wholesale grocery warehouse. Need to file 2012 taxes 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. Need to file 2012 taxes Your management activities. Need to file 2012 taxes The amount and kind of services you provide to your tenants. Need to file 2012 taxes The nature of your business risks connected with the properties. Need to file 2012 taxes Leasehold replaced with fee simple property. Need to file 2012 taxes   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. Need to file 2012 taxes   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. Need to file 2012 taxes A leasehold is property held under a lease, usually for a term of years. Need to file 2012 taxes Outdoor advertising display replaced with real property. Need to file 2012 taxes   You can elect to treat an outdoor advertising display as real property. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes   You can make this election only if you did not claim a section 179 deduction for the display. Need to file 2012 taxes You cannot cancel this election unless you get the consent of the IRS. Need to file 2012 taxes   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. Need to file 2012 taxes Substituting replacement property. Need to file 2012 taxes   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Need to file 2012 taxes But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Need to file 2012 taxes Controlling interest in a corporation. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes Basis adjustment to corporation's property. Need to file 2012 taxes   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Need to file 2012 taxes 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). Need to file 2012 taxes   Allocate this reduction to the following classes of property in the order shown below. Need to file 2012 taxes Property that is similar or related in service or use to the condemned property. Need to file 2012 taxes Depreciable property not reduced in (1). Need to file 2012 taxes All other property. Need to file 2012 taxes 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. Need to file 2012 taxes The reduced basis of any single property cannot be less than zero. Need to file 2012 taxes Main home replaced. Need to file 2012 taxes   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. Need to file 2012 taxes The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Need to file 2012 taxes   You must reduce the basis of your replacement property by the postponed gain. Need to file 2012 taxes 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. Need to file 2012 taxes Example. Need to file 2012 taxes City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Need to file 2012 taxes The city paid you a condemnation award of $400,000. Need to file 2012 taxes Your adjusted basis in the property was $80,000. Need to file 2012 taxes You realize a gain of $320,000 ($400,000 − $80,000). Need to file 2012 taxes You purchased a new home for $100,000. Need to file 2012 taxes You can exclude $250,000 of the realized gain from your gross income. Need to file 2012 taxes 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). Need to file 2012 taxes You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Need to file 2012 taxes The remaining $20,000 of realized gain is postponed. Need to file 2012 taxes Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Need to file 2012 taxes Replacement period. Need to file 2012 taxes   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Need to file 2012 taxes This is the replacement period. Need to file 2012 taxes   The replacement period for a condemnation begins on the earlier of the following dates. Need to file 2012 taxes The date on which you disposed of the condemned property. Need to file 2012 taxes The date on which the threat of condemnation began. Need to file 2012 taxes   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. Need to file 2012 taxes However, see the exceptions below. Need to file 2012 taxes Three-year replacement period for certain property. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes Five-year replacement period for certain property. Need to file 2012 taxes   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. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes 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. Need to file 2012 taxes Extended replacement period for taxpayers affected by other federally declared disasters. Need to file 2012 taxes    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. Need to file 2012 taxes For more information visit www. Need to file 2012 taxes irs. Need to file 2012 taxes gov/uac/Tax-Relief-in-Disaster-Situations. Need to file 2012 taxes Weather-related sales of livestock in an area eligible for federal assistance. Need to file 2012 taxes   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. Need to file 2012 taxes    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. Need to file 2012 taxes See Notice 2006-82. Need to file 2012 taxes You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Need to file 2012 taxes irs. Need to file 2012 taxes gov/irb/2006-39_IRB/ar13. Need to file 2012 taxes html. Need to file 2012 taxes    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. Need to file 2012 taxes 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. Need to file 2012 taxes You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Need to file 2012 taxes irs. Need to file 2012 taxes gov/irb/2013-45_IRB/ar04. Need to file 2012 taxes html. Need to file 2012 taxes The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Need to file 2012 taxes Determining when gain is realized. Need to file 2012 taxes   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Need to file 2012 taxes 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. Need to file 2012 taxes   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Need to file 2012 taxes 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. Need to file 2012 taxes   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Need to file 2012 taxes All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Need to file 2012 taxes All or part of the award is actually or constructively received. Need to file 2012 taxes 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. Need to file 2012 taxes Replacement property bought before the condemnation. Need to file 2012 taxes   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. Need to file 2012 taxes Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Need to file 2012 taxes Example. Need to file 2012 taxes On April 3, 2012, city authorities notified you that your property would be condemned. Need to file 2012 taxes On June 5, 2012, you acquired property to replace the property to be condemned. Need to file 2012 taxes You still had the new property when the city took possession of your old property on September 4, 2013. Need to file 2012 taxes You have made a replacement within the replacement period. Need to file 2012 taxes Extension. Need to file 2012 taxes   You can request an extension of the replacement period from the IRS director for your area. Need to file 2012 taxes You should apply before the end of the replacement period. Need to file 2012 taxes Your request should explain in detail why you need an extension. Need to file 2012 taxes The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Need to file 2012 taxes An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Need to file 2012 taxes   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Need to file 2012 taxes Extensions are usually limited to a period of 1 year or less. Need to file 2012 taxes The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Need to file 2012 taxes If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri