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State Tax Free States

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State Tax Free States

State tax free states Publication 584SP - Introductory Material Table of Contents Qué Hay de Nuevo Introduction Qué Hay de Nuevo Acontecimientos futuros. State tax free states  El IRS ha diseñado una página en el Internet, www. State tax free states irs. State tax free states gov/pub584sp, que incluye información sobre la Publicación 584(SP). State tax free states Toda información sobre desarrollos futuros que afecten la Publicación 584(SP) (como legislación aprobada después de que la publicación haya sido publicada) será anunciada en esta página. State tax free states Introduction Este registro se ha creado para ayudarlo a determinar la cantidad de una pérdida ocasionada por un desastre, hecho fortuito o robo que esté relacionada con propiedad de uso personal. State tax free states Contiene anexos para ayudarlo a calcular el valor de la pérdida de su residencia principal, de toda propiedad contenida dentro de la misma y de sus vehículos motorizados. State tax free states Sin embargo, estos anexos sólo son para su información. State tax free states Tiene que completar el Formulario 4684, Casualties and Thefts (Hechos Fortuitos y Robos), en inglés, para declarar su pérdida. State tax free states Prev  Up  Next   Home   More Online Publications
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Know Your Options

Airline delays caused by bad weather, traffic control problems, and mechanical repairs are hard to predict. If your flight is canceled, most airlines will rebook you on the earliest flight possible to your destination, at no additional charge. If you're able to find a flight on another airline, ask the first airline to endorse your ticket to the new carrier. This could save you a fare increase, but there is no rule requiring them to do this.

Each airline has its own policies about what it will do for delayed passengers; there are no federal requirements. If your flight is delayed or canceled, ask the airline if it will pay for meals or a phone call. Contrary to what many people believe, airlines are not required to do so.

Tarmac Delays

Under new federal rules, U.S. airlines operating domestic flights must allow passengers to deplane after a tarmac delay of three hours. The only exceptions allowed are for safety or security, or if air traffic control advises the pilot otherwise. Carriers are also required to provided adequate food and drinking water within two hours of being delayed on the tarmac; they must also maintain operable lavatories and, if necessary, provide medical attention.
There are other protections as well, such as prohibiting airlines from scheduling chronically delayed flights. For more information, search for Airline Passenger Protections on the Department of Transportation's website.

Overbooked Flights

Selling more tickets than there are seats is not illegal. Most airlines overbook their flights to compensate for "no-shows." If there are more passengers than seats just before a plane is scheduled to depart, you could be "bumped" or left behind against your will. Whether you are bumped or not may depend on when you officially check-in for your flight, so try to arrive early. The U.S. Department of Transportation requires airlines to ask people to give up their seats voluntarily, in exchange for compensation. Airlines decide what to offer volunteers, such as money, a free trip, food or lodging.

Federal rules protect you if you are "bumped" on most flights within the United States and on outbound international flights. Passengers who are involuntarily bumped are protected under Federal Aviation Administration guidelines. If you volunteer to be bumped, your agreement with the airline that is not regulated and will depend on negotiating at the gate.
The airline must give you a written statement describing your rights, as well as the airline's boarding priority rules and criteria. If the airline is not able to get you to your final destination within one hour of your original arrival time, the airline must pay you an amount equal to 200% of your one-way fare, with a maximum of $650. To receive this payment, you must have a confirmed reservation. You must also meet the airline's deadlines for ticketing and check-in. An airline may offer you a free ticket on a future flight in place of a check, but you have the right to insist on a check.

The State Tax Free States

State tax free states 3. State tax free states   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. State tax free states Form 4797. State tax free states Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. State tax free states Granting the right to remove deposits. State tax free states Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. State tax free states You must report the income from all the different sources on your tax return, unless it is excluded by law. State tax free states Where you report the income on your tax return depends on its source. State tax free states This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. State tax free states For information on where to report other income, see the Instructions for Form 1040, U. State tax free states S. State tax free states Individual Income Tax Return. State tax free states Accounting method. State tax free states   The rules discussed in this chapter assume you use the cash method of accounting. State tax free states Under the cash method, you generally include an item of income in gross income in the year you receive it. State tax free states See Cash Method in chapter 2. State tax free states   If you use an accrual method of accounting, different rules may apply to your situation. State tax free states See Accrual Method in chapter 2. State tax free states Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. State tax free states Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. State tax free states Use this schedule to figure the net profit or loss from regular farming operations. State tax free states Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. State tax free states This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. State tax free states It also includes income from the sale of crop shares if you materially participate in producing the crop. State tax free states See Rents (Including Crop Shares) , later. State tax free states Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. State tax free states Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. State tax free states Land. State tax free states Depreciable farm equipment. State tax free states Buildings and structures. State tax free states Livestock held for draft, breeding, sport, or dairy purposes. State tax free states Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. State tax free states Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. State tax free states Sales of Farm Products Where to report. State tax free states    Table 3-1 shows where to report the sale of farm products on your tax return. State tax free states Schedule F. State tax free states   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. State tax free states This includes money and the fair market value of any property or services you receive. State tax free states When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). State tax free states See chapter 6 for information on the basis of assets. State tax free states You generally report these amounts on Schedule F for the year you receive payment. State tax free states Example. State tax free states In 2012, you bought 20 feeder calves for $11,000 for resale. State tax free states You sold them in 2013 for $21,000. State tax free states You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. State tax free states Form 4797. State tax free states   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. State tax free states In either case, you should always report these sales on Form 4797 instead of Schedule F. State tax free states See Livestock under Ordinary or Capital Gain or Loss in chapter 8. State tax free states Animals you do not hold primarily for sale are considered business assets of your farm. State tax free states Table 3-1. State tax free states Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. State tax free states   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. State tax free states This applies even if your agent pays you in a later year. State tax free states For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. State tax free states Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. State tax free states You must meet all the following conditions to qualify. State tax free states Your principal trade or business is farming. State tax free states You use the cash method of accounting. State tax free states You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. State tax free states The weather-related condition caused an area to be designated as eligible for assistance by the federal government. State tax free states Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. State tax free states The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. State tax free states A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. State tax free states See Other Involuntary Conversions in chapter 11. State tax free states Usual business practice. State tax free states   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. State tax free states Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. State tax free states If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. State tax free states Connection with affected area. State tax free states   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. State tax free states However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. State tax free states This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. State tax free states Classes of livestock. State tax free states   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. State tax free states Do not separate animals into classes based on age, sex, or breed. State tax free states Amount to be postponed. State tax free states   Follow these steps to figure the amount of gain to be postponed for each class of animals. State tax free states Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. State tax free states For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. State tax free states Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. State tax free states Example. State tax free states You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. State tax free states As a result of drought, you sold 135 head during 2012. State tax free states You realized $70,200 from the sale. State tax free states On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. State tax free states The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. State tax free states How to postpone gain. State tax free states   To postpone gain, attach a statement to your tax return for the year of the sale. State tax free states The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. State tax free states A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). State tax free states Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. State tax free states A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. State tax free states The number of animals sold in each of the 3 preceding years. State tax free states The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. State tax free states The total number of animals sold and the number sold because of weather-related conditions during the tax year. State tax free states A computation, as described above, of the income to be postponed for each class of livestock. State tax free states   Generally, you must file the statement and the return by the due date of the return, including extensions. State tax free states However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. State tax free states For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). State tax free states Attach the statement to the amended return and write “Filed pursuant to section 301. State tax free states 9100-2” at the top of the amended return. State tax free states File the amended return at the same address you filed the original return. State tax free states Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. State tax free states Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. State tax free states However, if you materially participate in farming operations on the land, the rent is farm income. State tax free states See Landlord Participation in Farming in chapter 12. State tax free states Pasture income and rental. State tax free states   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. State tax free states You must enter it as Other income on Schedule F. State tax free states If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. State tax free states Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. State tax free states It does not matter whether you use the cash method of accounting or an accrual method of accounting. State tax free states If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. State tax free states See Landlord Participation in Farming in chapter 12. State tax free states Report the rental income on Schedule F. State tax free states If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). State tax free states The income is not included in self-employment income. State tax free states Crop shares you use to feed livestock. State tax free states   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. State tax free states You must include the fair market value of the crop shares in income at that time. State tax free states You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. State tax free states Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. State tax free states See  chapter 12. State tax free states Crop shares you give to others (gift). State tax free states   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. State tax free states You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. State tax free states Example. State tax free states A tenant farmed part of your land under a crop-share arrangement. State tax free states The tenant harvested and delivered the crop in your name to an elevator company. State tax free states Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. State tax free states They sell their crop shares in the following year and the elevator company makes payments directly to your children. State tax free states In this situation, you are considered to have received rental income and then made a gift of that income. State tax free states You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. State tax free states Crop share loss. State tax free states   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. State tax free states See Publication 925 for information on these rules. State tax free states Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. State tax free states However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. State tax free states See Cost-Sharing Exclusion (Improvements) , later. State tax free states Report the agricultural program payment on the appropriate line of Schedule F, Part I. State tax free states Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. State tax free states However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. State tax free states Claim the deduction on Schedule F for the year of repayment or reduction. State tax free states Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. State tax free states However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. State tax free states You do not need approval from the IRS to adopt this method of reporting CCC loans. State tax free states Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. State tax free states However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. State tax free states For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. State tax free states Revenue Procedure 2008-52, 2008-36 I. State tax free states R. State tax free states B. State tax free states 587, is available at  www. State tax free states irs. State tax free states gov/irb/2008-36_IRB/ar09. State tax free states html. State tax free states You can request income tax withholding from CCC loan payments you receive. State tax free states Use Form W-4V, Voluntary Withholding Request. State tax free states See chapter 16 for information about ordering the form. State tax free states To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. State tax free states Attach a statement to your return showing the details of the loan. State tax free states You must file the statement and the return by the due date of the return, including extensions. State tax free states If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). State tax free states Attach the statement to the amended return and write “Filed pursuant to section 301. State tax free states 9100-2” at the top of the return. State tax free states File the amended return at the same address you filed the original return. State tax free states When you make this election, the amount you report as income becomes your basis in the commodity. State tax free states See chapter 6 for information on the basis of assets. State tax free states If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. State tax free states If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. State tax free states If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. State tax free states If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. State tax free states Form 1099-A. State tax free states   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. State tax free states “CCC” should be shown in box 6. State tax free states The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. State tax free states Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. State tax free states If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. State tax free states Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. State tax free states Market gain should be reported as follows. State tax free states If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. State tax free states However, adjust the basis of the commodity for the amount of the market gain. State tax free states If you did not include the CCC loan in income in the year received, include the market gain in your income. State tax free states The following examples show how to report market gain. State tax free states Example 1. State tax free states Mike Green is a cotton farmer. State tax free states He uses the cash method of accounting and files his tax return on a calendar year basis. State tax free states He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. State tax free states In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. State tax free states 00 per pound). State tax free states In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. State tax free states 50 per pound (lower than the loan amount). State tax free states Later in 2013, he sold the cotton for $2,500. State tax free states The market gain on the redemption was $. State tax free states 50 ($2. State tax free states 00 – $1. State tax free states 50) per pound. State tax free states Mike realized total market gain of $500 ($. State tax free states 50 x 1,000 pounds). State tax free states How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. State tax free states Included CCC loan. State tax free states   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. State tax free states The $500 market gain is not recognized on the redemption. State tax free states He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. State tax free states   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. State tax free states His gain from the sale is $1,000 ($2,500 – $1,500). State tax free states He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. State tax free states Excluded CCC loan. State tax free states   Mike has income of $500 from market gain in 2013. State tax free states He reports it on Schedule F, lines 4a and 4b. State tax free states His basis in the cotton is zero, so his gain from its sale is $2,500. State tax free states He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. State tax free states Example 2. State tax free states The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. State tax free states Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. State tax free states In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. State tax free states How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. State tax free states Included CCC loan. State tax free states   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. State tax free states The $500 market gain is not recognized on the redemption. State tax free states Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. State tax free states   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. State tax free states Mike has no gain or loss on its sale to the cotton buyer for that amount. State tax free states Excluded CCC loan. State tax free states   As in Example 1, Mike has income of $500 from market gain in 2013. State tax free states He reports it on Schedule F, lines 4a and 4b. State tax free states His basis in the cotton is zero, so his gain from its sale is $1,500. State tax free states He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. State tax free states Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. State tax free states You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. State tax free states Cost-share payments you receive may qualify for the cost-sharing exclusion. State tax free states See Cost-Sharing Exclusion (Improvements) , later. State tax free states CRP payments are reported to you on Form 1099-G. State tax free states Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. State tax free states See the instructions for Schedule SE (Form 1040). State tax free states Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. State tax free states You generally include them in the year you receive them. State tax free states Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. State tax free states You can request income tax withholding from crop disaster payments you receive from the federal government. State tax free states Use Form W-4V, Voluntary Withholding Request. State tax free states See chapter 16 for information about ordering the form. State tax free states Election to postpone reporting until the following year. State tax free states   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. State tax free states You use the cash method of accounting. State tax free states You receive the crop insurance proceeds in the same tax year the crops are damaged. State tax free states You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. State tax free states   Deferral is not permitted for proceeds received from revenue insurance policies. State tax free states   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. State tax free states Check the box on line 8c and attach a statement to your tax return. State tax free states The statement must include your name and address and contain the following information. State tax free states A statement that you are making an election under IRC section 451(d) and Regulations section 1. State tax free states 451-6. State tax free states The specific crop or crops physically destroyed or damaged. State tax free states A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. State tax free states The cause of the physical destruction or damage and the date or dates it occurred. State tax free states The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. State tax free states The name of each insurance carrier from whom you received payments. State tax free states   One election covers all crops representing a single trade or business. State tax free states If you have more than one farming business, make a separate election for each one. State tax free states For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. State tax free states   An election is binding for the year unless the IRS approves your request to change it. State tax free states To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. State tax free states Ogden Submission Processing Center P. State tax free states O. State tax free states Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. State tax free states These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. State tax free states They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. State tax free states Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. State tax free states You must include these benefits in income in the year you receive them. State tax free states You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. State tax free states Report the benefits on Schedule F, Part I, as agricultural program payments. State tax free states You can usually take a current deduction for the same amount as a feed expense. State tax free states Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. State tax free states A payment is any economic benefit you get as a result of an improvement. State tax free states However, this exclusion applies only to that part of a payment that meets all three of the following tests. State tax free states It was for a capital expense. State tax free states You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. State tax free states You must include the payment for a deductible expense in income, and you can take any offsetting deduction. State tax free states See chapter 5 for information on deducting soil and water conservation expenses. State tax free states It does not substantially increase your annual income from the property for which it is made. State tax free states An increase in annual income is substantial if it is more than the greater of the following amounts. State tax free states 10% of the average annual income derived from the affected property before receiving the improvement. State tax free states $2. State tax free states 50 times the number of affected acres. State tax free states The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. State tax free states Qualifying programs. State tax free states   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. State tax free states The rural clean water program authorized by the Federal Water Pollution Control Act. State tax free states The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. State tax free states The water bank program authorized by the Water Bank Act. State tax free states The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. State tax free states The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. State tax free states The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. State tax free states The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. State tax free states Certain small watershed programs, listed later. State tax free states Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. State tax free states Several state programs have been approved. State tax free states For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). State tax free states Small watershed programs. State tax free states   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. State tax free states The programs under the Watershed Protection and Flood Prevention Act. State tax free states The flood prevention projects under the Flood Control Act of 1944. State tax free states The Emergency Watershed Protection Program under the Flood Control Act of 1950. State tax free states Certain programs under the Colorado River Basin Salinity Control Act. State tax free states The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. State tax free states The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. State tax free states The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. State tax free states The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. State tax free states The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. State tax free states The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. State tax free states The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. State tax free states The Conservation Security Program authorized by the Food Security Act of 1985. State tax free states The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. State tax free states Income realized. State tax free states   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). State tax free states Value of the improvement. State tax free states   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. State tax free states The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. State tax free states Any government payments under a program not listed earlier. State tax free states Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. State tax free states Any government payment to you for rent or for your services. State tax free states The denominator of the fraction is the total cost of the improvement. State tax free states Excludable portion. State tax free states   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. State tax free states 10% of the prior average annual income from the affected acreage. State tax free states The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. State tax free states $2. State tax free states 50 times the number of affected acres. State tax free states The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. State tax free states You may need to consult your tax advisor for assistance. State tax free states Example. State tax free states One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. State tax free states The total cost of the improvement was $500,000. State tax free states The USDA paid $490,000. State tax free states You paid $10,000. State tax free states The value of the cost-sharing improvement is $15,000. State tax free states The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. State tax free states The excludable portion is the greater amount, $1,550. State tax free states You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. State tax free states   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. State tax free states Any payment excluded from income is not part of your basis. State tax free states In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. State tax free states   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. State tax free states How to report the exclusion. State tax free states   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. State tax free states The statement must include the following information. State tax free states The dollar amount of the cost funded by the government payment. State tax free states The value of the improvement. State tax free states The amount you are excluding. State tax free states   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. State tax free states Recapture. State tax free states   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. State tax free states In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. State tax free states You must report the recapture on Form 4797. State tax free states See Section 1255 property under Other Gains in chapter 9. State tax free states Electing not to exclude payments. State tax free states   You can elect not to exclude all or part of any payments you receive under these programs. State tax free states If you make this election for all of these payments, none of the above restrictions and rules apply. State tax free states You must make this election by the due date, including extensions, for filing your return. State tax free states In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. State tax free states If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). State tax free states Write “Filed pursuant to section 301. State tax free states 9100-2” at the top of the amended return and file it at the same address you filed the original return. State tax free states Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. State tax free states You must include these payments on Schedule F, lines 4a and 4b. State tax free states The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. State tax free states You must include these payments on Schedule F, lines 6a and 6b. State tax free states The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. State tax free states Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. State tax free states As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. State tax free states If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. State tax free states If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. State tax free states Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. State tax free states Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. State tax free states The gain or loss is capital or ordinary depending on how you used the quota. State tax free states See Capital or ordinary gain or loss , later. State tax free states Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. State tax free states Adjusted basis. State tax free states   The adjusted basis of your quota is determined differently depending on how you obtained the quota. State tax free states The basis of a quota derived from an original grant by the federal government is zero. State tax free states The basis of a purchased quota is the purchase price. State tax free states The basis of a quota received as a gift is generally the same as the donor's basis. State tax free states However, under certain circumstances, the basis is increased by the amount of gift taxes paid. State tax free states If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. State tax free states The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. State tax free states Reduction of basis. State tax free states   You are required to reduce the basis of your tobacco quota by the following amounts. State tax free states Deductions you took for amortization, depletion, or depreciation. State tax free states Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. State tax free states The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). State tax free states Amount treated as interest. State tax free states   You must reduce your tobacco quota buyout program payment by the amount treated as interest. State tax free states The interest is reportable as ordinary income. State tax free states If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. State tax free states   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. State tax free states You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. State tax free states For more information, see Notice 2005-57, 2005-32 I. State tax free states R. State tax free states B. State tax free states 267, available at www. State tax free states irs. State tax free states gov/irb/2005-32_IRB/ar13. State tax free states html. State tax free states Installment method. State tax free states   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. State tax free states Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. State tax free states See chapter 10 for more information. State tax free states Capital or ordinary gain or loss. State tax free states   Whether your gain or loss is ordinary or capital depends on how you used the quota. State tax free states Quota used in the trade or business of farming. State tax free states   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. State tax free states See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. State tax free states Quota held for investment. State tax free states   If you held the quota for investment purposes, any gain or loss is capital gain or loss. State tax free states The same result also applies if you held the quota for the production of income, though not connected with a trade or business. State tax free states Gain treated as ordinary income. State tax free states   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. State tax free states Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. State tax free states The cost of acquiring a quota. State tax free states Amounts for amortization, depletion, or depreciation. State tax free states Amounts to reflect a reduction in the quota pounds. State tax free states   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. State tax free states Self-employment income. State tax free states   The tobacco quota buyout payments are not self-employment income. State tax free states Income averaging for farmers. State tax free states   The gain or loss resulting from the quota payments does not qualify for income averaging. State tax free states A tobacco quota is considered an interest in land. State tax free states Income averaging is not available for gain or loss arising from the sale or other disposition of land. State tax free states Involuntary conversion. State tax free states   The buyout of the tobacco quota is not an involuntary conversion. State tax free states Form 1099-S. State tax free states   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. State tax free states The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. State tax free states Like-kind exchange of quota. State tax free states   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. State tax free states See Notice 2005-57 for more information. State tax free states Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. State tax free states Taxation of payments to tobacco growers. State tax free states   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. State tax free states Individuals will generally report the payments as an Agricultural program payment on Schedule F. State tax free states If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. State tax free states Self-employment income. State tax free states   Payments to growers generally represent self-employment income. State tax free states If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. State tax free states Income averaging for farmers. State tax free states   Payments to growers who are individuals qualify for farm income averaging. State tax free states Form 1099-G. State tax free states   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. State tax free states Other Payments You must include most other government program payments in income. State tax free states Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. State tax free states How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. State tax free states Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. State tax free states You must also capitalize the full cost of the improvement. State tax free states Since you have included the payments in income, they do not reduce your basis. State tax free states However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. State tax free states National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. State tax free states You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. State tax free states If you produce a tobacco crop, report the payments as income from farming on your Schedule F. State tax free states If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. State tax free states Payment to More Than One Person The USDA reports program payments to the IRS. State tax free states It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). State tax free states If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. State tax free states You should file Form 1099-G to report the identity of the actual recipient to the IRS. State tax free states You should also give this information to the recipient. State tax free states You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. State tax free states Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. State tax free states However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. State tax free states See chapter 16 for information about ordering Form 1099-G. State tax free states Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). State tax free states If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. State tax free states Form 1099-PATR. State tax free states   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. State tax free states Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. State tax free states For information on the alternative minimum tax, see the Instructions for Form 6251. State tax free states Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. State tax free states They include the following items. State tax free states Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). State tax free states The stated dollar value of qualified written notices of allocation. State tax free states The fair market value of other property. State tax free states Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. State tax free states You must reduce the cost or other basis of these items by the amount of such patronage dividends received. State tax free states Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. State tax free states If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. State tax free states Qualified written notice of allocation. State tax free states   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. State tax free states A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. State tax free states The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. State tax free states You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. State tax free states Signing and giving a written agreement to the cooperative. State tax free states Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. State tax free states The cooperative must notify you in writing of this bylaw and give you a copy. State tax free states Endorsing and cashing a qualified check paid as part of the same patronage dividend. State tax free states You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. State tax free states Qualified check. State tax free states   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. State tax free states It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. State tax free states It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. State tax free states Loss on redemption. State tax free states   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. State tax free states The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. State tax free states Nonqualified notice of allocation. State tax free states   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. State tax free states Your basis in the notice is zero. State tax free states You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. State tax free states Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. State tax free states However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. State tax free states   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. State tax free states For example, if it represents interest income, report it on your return as interest. State tax free states Buying or selling capital assets or depreciable property. State tax free states   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. State tax free states You must, however, reduce the basis of these assets by the dividends. State tax free states This reduction is taken into account as of the first day of the tax year in which the dividends are received. State tax free states If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. State tax free states   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. State tax free states Example. State tax free states On July 1, 2012, Mr. State tax free states Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. State tax free states The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). State tax free states Mr. State tax free states Brown files his return on a calendar year basis. State tax free states For 2012, he claimed a depreciation deduction of $311, using the 10. State tax free states 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). State tax free states On July 2, 2013, the cooperative association paid Mr. State tax free states Brown a $300 cash patronage dividend for buying the machine. State tax free states Mr. State tax free states Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. State tax free states Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. State tax free states 38% × 1. State tax free states 5 = 23. State tax free states 07% Depreciation deduction for 2013 ($2,289 × 23. State tax free states 07%) $528 Exceptions. State tax free states   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. State tax free states If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. State tax free states If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). State tax free states   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. State tax free states Personal purchases. State tax free states   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). State tax free states This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. State tax free states Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. State tax free states A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. State tax free states These allocations can be paid in money, other property, or qualified certificates. State tax free states Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. State tax free states Qualified certificates. State tax free states   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. State tax free states The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. State tax free states If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. State tax free states Nonqualified certificates. State tax free states   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. State tax free states Your basis in the certificate is zero. State tax free states You must include in income any amount you receive from its sale, redemption, or other disposition. State tax free states Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. State tax free states Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. State tax free states For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. State tax free states General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. State tax free states Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. State tax free states It is excluded from taxable income (see Exclusions , later). State tax free states Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. State tax free states If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. State tax free states Election to defer income from discharge of indebtedness. State tax free states   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. State tax free states Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. State tax free states See IRC section 108(i) and Publication 4681 for details. State tax free states Form 1099-C. State tax free states   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. State tax free states The amount of debt canceled is shown in box 2. State tax free states Exceptions The following discussion covers some exceptions to the general rule for canceled debt. State tax free states These exceptions apply before the exclusions discussed below. State tax free states Price reduced after purchase. State tax free states   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. State tax free states Reduce your basis in the property by the amount of the reduction in the debt. State tax free states The rules that apply to bankruptcy and insolvency are explained below under Exclusions . State tax free states Deductible debt. State tax free states   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. State tax free states This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. State tax free states Example. State tax free states You get accounting services for your farm on credit. State tax free states Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. State tax free states Your accountant forgives part of the amount you owe for the accounting services. State tax free states How you treat the canceled debt depends on your method of accounting. State tax free states Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. State tax free states Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. State tax free states Exclusions Do not include canceled debt in income in the following situations. State tax free states The cancellation takes place in a bankruptcy case under title 11 of the U. State tax free states S. State tax free states Code. State tax free states The cancellation takes place when you are insolvent. State tax free states The canceled debt is a qualified farm debt. State tax free states The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). State tax free states See Publication 334, Tax Guide for Small Business, chapter 5. State tax free states The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. State tax free states The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. State tax free states If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. State tax free states If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. State tax free states See Form 982 , later, for information on how to claim an exclusion for a canceled debt. State tax free states Debt. State tax free states   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. State tax free states Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. State tax free states Bankruptcy. State tax free states   A bankruptcy case is a case under title 11 of the U. State tax free states S. State tax free states Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. State tax free states   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. State tax free states Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . State tax free states Insolvency. State tax free states   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. State tax free states   You can exclude canceled debt from gross income up to the amount by which you are insolvent. State tax free states If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. State tax free states Otherwise, you include the difference in gross income. State tax free states Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . State tax free states You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. State tax free states Example. State tax free states You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. State tax free states Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. State tax free states Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). State tax free states You can exclude this amount from income. State tax free states The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. State tax free states If not, you must include it in income. State tax free states Reduction of tax attributes. State tax free states   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. State tax free states Order of reduction. State tax free states   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. State tax free states Net operating loss (NOL). State tax free states Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. State tax free states Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. State tax free states General business credit carryover. State tax free states Reduce the credit carryover to or from the tax year of the debt cancellation. State tax free states Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. State tax free states Minimum tax credit. State tax free states Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. State tax free states Reduce the credit 331/3 cents for each dollar of excluded canceled debt. State tax free states Capital loss. State tax free states Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. State tax free states Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. State tax free states Basis. State tax free states Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. State tax free states Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. State tax free states Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. State tax free states Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. State tax free states Inventory and accounts and notes receivable. State tax free states Other property. State tax free states Reduce the basis one dollar for each dollar of excluded canceled debt. State tax free states However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. State tax free states For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. State tax free states 1017-1(b)(2). State tax free states Also see Electing to reduce the basis of depreciable property