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Student Tax Returns

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Student Tax Returns

Student tax returns Publication 915 - Main Content Table of Contents Are Any of Your Benefits Taxable?Worksheet A. Student tax returns Exemption from withholding. Student tax returns How To Report Your Benefits How Much Is Taxable?Examples Lump-Sum ElectionExample Deductions Related to Your BenefitsRepayments More Than Gross Benefits Worksheets AppendixForm SSA-1099, Social Security Benefit Statement 2013 Form SSA-1042S, Social Security Benefit Statement 2013 (Nonresident Aliens) Form RRB-1099, Payments by the Railroad Retirement Board 2013 Form RRB-1042S, Payments by the Railroad Retirement Board 2013 (Nonresident Aliens) How To Get Tax HelpLow Income Taxpayer Clinics Are Any of Your Benefits Taxable? To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Student tax returns When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Student tax returns S. Student tax returns savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned by bona fide residents of American Samoa or Puerto Rico. Student tax returns Children's benefits. Student tax returns   The rules in this publication apply to benefits received by children. Student tax returns See Who is taxed , later. Student tax returns The SSA issues Form SSA-1099 and Form SSA-1042S. Student tax returns The RRB issues Form RRB-1099 and Form RRB-1042S. Student tax returns These forms (tax statements) report the amounts paid and repaid, and taxes withheld for a tax year. Student tax returns You may receive more than one of these forms for the same tax year. Student tax returns See the Appendix at the end of this publication for more information. Student tax returns Each original Form RRB-1099 or Form RRB-1042S is valid unless it has been corrected. Student tax returns The RRB will issue a corrected Form RRB-1099 or Form RRB-1042S if there is an error in the original. Student tax returns A corrected Form RRB-1099 or Form RRB-1042S is indicated as “CORRECTED” and replaces the corresponding original Form RRB-1099 or Form RRB-1042S. Student tax returns You must use the latest corrected Form RRB-1099 or Form RRB-1042S you received and any original Form RRB-1099 or Form RRB-1042S that the RRB has not corrected when you determine what amounts to report on your tax return. Student tax returns Figuring total income. Student tax returns   To figure the total of one-half of your benefits plus your other income, use Worksheet A, discussed later. Student tax returns If the total is more than your base amount, part of your benefits may be taxable. Student tax returns   If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Student tax returns Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Student tax returns If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Student tax returns If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Student tax returns Base amount. Student tax returns   Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. Student tax returns Worksheet A. Student tax returns   You can use Worksheet A to figure the amount of income to compare with your base amount. Student tax returns This is a quick way to check whether some of your benefits may be taxable. Student tax returns     Worksheet A. Student tax returns A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Student tax returns Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Student tax returns Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Student tax returns (If you received more than one form, combine the amounts from box 5 and enter the total. Student tax returns ) A. Student tax returns   Note. Student tax returns If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Student tax returns B. Student tax returns Enter one-half of the amount on line A B. Student tax returns   C. Student tax returns Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Student tax returns   D. Student tax returns Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Student tax returns   E. Student tax returns Add lines B, C, and D E. Student tax returns   Note. Student tax returns Compare the amount on line E to your base amount for your filing status. Student tax returns If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Student tax returns If the amount on line E is more than your base amount, some of your benefits may be taxable. Student tax returns You need to complete Worksheet 1, shown later. Student tax returns If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Student tax returns   Example. Student tax returns You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. Student tax returns In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Student tax returns Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. Student tax returns You also received a taxable pension of $22,800 and interest income of $500. Student tax returns You did not have any tax-exempt interest income. Student tax returns Your benefits are not taxable for 2013 because your income, as figured in Worksheet A below, is not more than your base amount ($32,000) for married filing jointly. Student tax returns   Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status. Student tax returns     Filled-in Worksheet A. Student tax returns A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Student tax returns Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Student tax returns Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Student tax returns (If you received more than one form, combine the amounts from box 5 and enter the total. Student tax returns ) A. Student tax returns $11,000 Note. Student tax returns If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Student tax returns B. Student tax returns Enter one-half of the amount on line A B. Student tax returns 5,500 C. Student tax returns Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Student tax returns 23,300 D. Student tax returns Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Student tax returns -0- E. Student tax returns Add lines B, C, and D E. Student tax returns $28,800 Note. Student tax returns Compare the amount on line E to your base amount for your filing status. Student tax returns If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Student tax returns If the amount on line E is more than your base amount, some of your benefits may be taxable. Student tax returns You need to complete Worksheet 1, shown later. Student tax returns If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Student tax returns   Who is taxed. Student tax returns   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. Student tax returns For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. Student tax returns One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child. Student tax returns Repayment of benefits. Student tax returns   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Student tax returns It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Student tax returns If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Student tax returns   Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Student tax returns Your repayments are shown in box 4. Student tax returns The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Student tax returns Use the amount in box 5 to figure whether any of your benefits are taxable. Student tax returns Example. Student tax returns In 2012, you received $3,000 in social security benefits, and in 2013 you received $2,700. Student tax returns In March 2013, SSA notified you that you should have received only $2,500 in benefits in 2012. Student tax returns During 2013, you repaid $500 to SSA. Student tax returns The Form SSA-1099 you received for 2013 shows $2,700 in box 3 (gross amount) and $500 in box 4 (repayment). Student tax returns The amount in box 5 shows your net benefits of $2,200 ($2,700 minus $500). Student tax returns Tax withholding and estimated tax. Student tax returns   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. Student tax returns If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Statement. Student tax returns   If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. Student tax returns For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Student tax returns U. Student tax returns S. Student tax returns citizens residing abroad. Student tax returns   U. Student tax returns S. Student tax returns citizens who are residents of the following countries are exempt from U. Student tax returns S. Student tax returns tax on their benefits. Student tax returns Canada. Student tax returns Egypt. Student tax returns Germany. Student tax returns Ireland. Student tax returns Israel. Student tax returns Italy. Student tax returns (You must also be a citizen of Italy for the exemption to apply. Student tax returns ) Romania. Student tax returns United Kingdom. Student tax returns   The SSA will not withhold U. Student tax returns S. Student tax returns tax from your benefits if you are a U. Student tax returns S. Student tax returns citizen. Student tax returns   The RRB will withhold U. Student tax returns S. Student tax returns tax from your benefits unless you file Form RRB-1001, Nonresident Questionnaire, with the RRB to provide citizenship and residency information. Student tax returns If you do not file Form RRB-1001, the RRB will consider you a nonresident alien and withhold tax from your railroad retirement benefits at a 30% rate. Student tax returns Contact the RRB to get this form. Student tax returns Lawful permanent residents. Student tax returns   For U. Student tax returns S. Student tax returns income tax purposes, lawful permanent residents (green card holders) are considered resident aliens until their lawful permanent resident status under the immigration laws is either taken away or is administratively or judicially determined to have been abandoned. Student tax returns Social security benefits paid to a green card holder are not subject to 30% withholding. Student tax returns If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. Student tax returns SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. Student tax returns If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. Student tax returns You must also attach the following information to your Form 1040 or 1040A: A copy of the Form SSA-1042S, Social Security Benefit Statement, A copy of the “green card,” and A signed declaration that includes the following statements:    “The SSA should not have withheld federal income tax from my social security benefits because I am a U. Student tax returns S. Student tax returns lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. Student tax returns I am filing a U. Student tax returns S. Student tax returns income tax return for the tax year as a resident alien reporting all of my worldwide income. Student tax returns I have not claimed benefits for the tax year under an income tax treaty as a nonresident alien. Student tax returns ” Nonresident aliens. Student tax returns   A nonresident alien is an individual who is not a citizen or resident of the United States. Student tax returns If you are a nonresident alien, the rules discussed in this publication do not apply to you. Student tax returns Instead, 85% of your benefits are taxed at a 30% rate, unless exempt (or subject to a lower rate) by treaty. Student tax returns You will receive a Form SSA-1042S or Form RRB-1042S showing the amount of your benefits. Student tax returns These forms will also show the tax rate and the amount of tax withheld from your benefits. Student tax returns   Under tax treaties with the following countries, residents of these countries are exempt from U. Student tax returns S. Student tax returns tax on their benefits. Student tax returns Canada. Student tax returns Egypt. Student tax returns Germany. Student tax returns Ireland. Student tax returns Israel. Student tax returns Italy. Student tax returns Japan. Student tax returns Romania. Student tax returns United Kingdom. Student tax returns   Under a treaty with India, benefits paid to individuals who are both residents and nationals of India are exempt from U. Student tax returns S. Student tax returns tax if the benefits are for services performed for the United States, its subdivisions, or local government authorities. Student tax returns   If you are a resident of Switzerland, your total benefit amount will be taxed at a 15% rate. Student tax returns   For more information on whether you are a nonresident alien, see Publication 519, U. Student tax returns S. Student tax returns Tax Guide for Aliens. Student tax returns Exemption from withholding. Student tax returns   If your social security benefits are exempt from tax because you are a resident of one of the treaty countries listed, the SSA will not withhold U. Student tax returns S. Student tax returns tax from your benefits. Student tax returns   If your railroad retirement benefits are exempt from tax because you are a resident of one of the treaty countries listed, you can claim an exemption from withholding by filing Form RRB-1001 with the RRB. Student tax returns Contact the RRB to get this form. Student tax returns Canadian or German social security benefits paid to U. Student tax returns S. Student tax returns residents. Student tax returns   Under income tax treaties with Canada and Germany, social security benefits paid by those countries to U. Student tax returns S. Student tax returns residents are treated for U. Student tax returns S. Student tax returns income tax purposes as if they were paid under the social security legislation of the United States. Student tax returns If you receive social security benefits from Canada or Germany, include them on line 1 of Worksheet 1, shown later. Student tax returns How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040A. Student tax returns You cannot use Form 1040EZ. Student tax returns Reporting on Form 1040. Student tax returns   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Student tax returns Reporting on Form 1040A. Student tax returns   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Student tax returns Benefits not taxable. Student tax returns   If you are filing Form 1040EZ, do not report any benefits on your tax return. Student tax returns If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns How Much Is Taxable? If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Student tax returns Generally, the higher that total amount, the greater the taxable part of your benefits. Student tax returns Maximum taxable part. Student tax returns   Generally, up to 50% of your benefits will be taxable. Student tax returns However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Student tax returns The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Student tax returns You are married filing separately and lived with your spouse at any time during 2013. Student tax returns Which worksheet to use. Student tax returns   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Student tax returns You can use either that worksheet or Worksheet 1 in this publication, unless any of the following situations applies to you. Student tax returns You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. Student tax returns In this situation you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Student tax returns Situation (1) does not apply and you take an exclusion for interest from qualified U. Student tax returns S. Student tax returns savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Student tax returns In this situation, you must use Worksheet 1 in this publication to figure your taxable benefits. Student tax returns You received a lump-sum payment for an earlier year. Student tax returns In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in this publication. Student tax returns See Lump-Sum Election , later. Student tax returns Examples A few examples you can use as a guide to figure the taxable part of your benefits follow. Student tax returns Filled-in Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns $5,980         2. Student tax returns Enter one-half of line 1 2. Student tax returns 2,990     3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns 28,990     4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns -0-     5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns -0-     6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 31,980     7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns -0-     8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns 31,980     9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns 25,000       Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns 6,980     11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns 9,000     12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns -0-     13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns 6,980     14. Student tax returns Enter one-half of line 13 14. Student tax returns 3,490     15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns 2,990     16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns -0-     17. Student tax returns Add lines 15 and 16 17. Student tax returns 2,990     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns 5,083     19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns $2,990       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Example 1. Student tax returns George White is single and files Form 1040 for 2013. Student tax returns In addition to receiving social security payments, he received a fully taxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of $28,990. Student tax returns He received a Form SSA-1099 in January 2014 that shows his net social security benefits of $5,980 in box 5. Student tax returns   To figure his taxable benefits, George completes Worksheet 1, shown below. Student tax returns On line 20a of his Form 1040, George enters his net benefits of $5,980. Student tax returns On line 20b, he enters his taxable benefits of $2,990. Student tax returns Example 2. Student tax returns Ray and Alice Hopkins file a joint return on Form 1040A for 2013. Student tax returns Ray is retired and received a fully taxable pension of $15,500. Student tax returns He also received social security benefits and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. Student tax returns Alice worked during the year and had wages of $14,000. Student tax returns She made a deductible payment to her IRA account of $1,000. Student tax returns Ray and Alice have two savings accounts with a total of $250 in taxable interest income. Student tax returns They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. Student tax returns They find none of Ray's social security benefits are taxable. Student tax returns On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b. Student tax returns Filled-in Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns $5,600         2. Student tax returns Enter one-half of line 1 2. Student tax returns 2,800     3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns 29,750     4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns -0-     5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns -0-     6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 32,550     7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns 1,000     8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns 31,550     9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns 32,000       Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns       11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns       12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns       13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns       14. Student tax returns Enter one-half of line 13 14. Student tax returns       15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns       16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns       17. Student tax returns Add lines 15 and 16 17. Student tax returns       18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns       19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Example 3. Student tax returns Joe and Betty Johnson file a joint return on Form 1040 for 2013. Student tax returns Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Student tax returns Joe's Form RRB-1099 shows $10,000 in box 5. Student tax returns Betty is a retired government worker and received a fully taxable pension of $38,000. Student tax returns They had $2,300 in taxable interest income plus interest of $200 on a qualified U. Student tax returns S. Student tax returns savings bond. Student tax returns The savings bond interest qualified for the exclusion. Student tax returns They figure their taxable benefits by completing Worksheet 1 below. Student tax returns Because they have qualified U. Student tax returns S. Student tax returns savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. Student tax returns On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500). Student tax returns More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. Student tax returns (See Maximum taxable part under How Much Is Taxable earlier. Student tax returns ) Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b. Student tax returns Filled-in Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns $10,000         2. Student tax returns Enter one-half of line 1 2. Student tax returns 5,000     3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns 40,500     4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns -0-     5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns -0-     6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 45,500     7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns -0-     8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns 45,500     9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns 32,000       Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns 13,500     11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns 12,000     12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns 1,500     13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns 12,000     14. Student tax returns Enter one-half of line 13 14. Student tax returns 6,000     15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns 5,000     16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns 1,275     17. Student tax returns Add lines 15 and 16 17. Student tax returns 6,275     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns 8,500     19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns $6,275       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Filled-in Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns $4,000         2. Student tax returns Enter one-half of line 1 2. Student tax returns 2,000     3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns 8,000     4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns -0-     5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns -0-     6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 10,000     7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns -0-     8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns 10,000     9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns         Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns       11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns       12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns       13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns       14. Student tax returns Enter one-half of line 13 14. Student tax returns       15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns       16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns       17. Student tax returns Add lines 15 and 16 17. Student tax returns 8,500     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns 3,400     19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns $3,400       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Example 4. Student tax returns Bill and Eileen Jones are married and live together, but file separate Form 1040 returns for 2013. Student tax returns Bill earned $8,000 during 2013. Student tax returns The only other income he had for the year was $4,000 net social security benefits (box 5 of his Form SSA-1099). Student tax returns Bill figures his taxable benefits by completing Worksheet 1 below. Student tax returns He must include 85% of his social security benefits in his taxable income because he is married filing separately and lived with his spouse during 2013. Student tax returns See How Much Is Taxable earlier. Student tax returns Bill enters $4,000 on his Form 1040, line 20a, and $3,400 on Form 1040, line 20b. Student tax returns Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Student tax returns This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Student tax returns No part of the lump-sum death benefit is subject to tax. Student tax returns Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Student tax returns However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Student tax returns You can elect this method if it lowers your taxable benefits. Student tax returns Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year's income. Student tax returns Then you subtract any taxable benefits for that year that you previously reported. Student tax returns The remainder is the taxable part of the lump-sum payment. Student tax returns Add it to the taxable part of your benefits for 2013 (figured without the lump-sum payment for the earlier year). Student tax returns Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. Student tax returns Do not file an amended return for the earlier year. Student tax returns Will the lump-sum election method lower your taxable benefits?   To find out, take the following steps. Student tax returns Complete Worksheet 1 in this publication. Student tax returns Complete Worksheet 2 and Worksheet 3 as appropriate. Student tax returns Use Worksheet 2 if your lump-sum payment was for a year after 1993. Student tax returns Use Worksheet 3 if it was for 1993 or an earlier year. Student tax returns Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received the lump-sum payment. Student tax returns Complete Worksheet 4. Student tax returns Compare the taxable benefits on line 19 of Worksheet 1 with the taxable benefits on line 21 of Worksheet 4. Student tax returns If the taxable benefits on Worksheet 4 are lower than the taxable benefits on Worksheet 1, you can elect to report the lower amount on your return. Student tax returns Making the election. Student tax returns   If you elect to report your taxable benefits under the lump-sum election method, follow the instructions at the bottom of Worksheet 4. Student tax returns Do not attach the completed worksheets to your return. Student tax returns Keep them with your records. Student tax returns    Once you elect this method of figuring the taxable part of a lump-sum payment, you can revoke your election only with the consent of the IRS. Student tax returns Lump-sum payment reported on Form SSA-1099 or RRB-1099. Student tax returns   If you received a lump-sum payment in 2013 that includes benefits for one or more earlier years after 1983, it will be included in box 3 of either Form SSA-1099 or Form RRB-1099. Student tax returns That part of any lump-sum payment for years before 1984 is not taxed and will not be shown on the form. Student tax returns The form will also show the year (or years) the payment is for. Student tax returns However, Form RRB-1099 will not show a breakdown by year (or years) of any lump-sum payment for years before 2011. Student tax returns You must contact the RRB for a breakdown by year for any amount shown in box 9. Student tax returns Example Jane Jackson is single. Student tax returns In 2012 she applied for social security disability benefits but was told she was ineligible. Student tax returns She appealed the decision and won. Student tax returns In 2013, she received a lump-sum payment of $6,000, of which $2,000 was for 2012 and $4,000 was for 2013. Student tax returns Jane also received $5,000 in social security benefits in 2013, so her total benefits in 2013 were $11,000. Student tax returns Jane's other income for 2012 and 2013 is as follows. Student tax returns   Income 2012 2013     Wages $20,000 $ 3,500     Interest income 2,000 2,500     Dividend income 1,000 1,500     Fully taxable pension   18,000     Total $23,000 $25,500   To see if the lump-sum election method results in lower taxable benefits, she completes Worksheets 1, 2, and 4 from this publication. Student tax returns She does not need to complete Worksheet 3 because her lump-sum payment was for years after 1993. Student tax returns Jane completes Worksheet 1 to find the amount of her taxable benefits for 2013 under the regular method. Student tax returns She completes Worksheet 2 to find the taxable part of the lump-sum payment for 2012 under the lump-sum election method. Student tax returns She completes Worksheet 4 to decide if the lump-sum election method will lower her taxable benefits. Student tax returns After completing the worksheets, Jane compares the amounts from Worksheet 4, line 21, and Worksheet 1, line 19. Student tax returns Because the amount on Worksheet 4 is smaller, she chooses to use the lump-sum election method. Student tax returns To do this, she prints “LSE” to the left of Form 1040, line 20a. Student tax returns She then enters $11,000 on Form 1040, line 20a, and her taxable benefits of $2,500 on line 20b. Student tax returns Jane's filled-in worksheets (1, 2, and 4) follow. Student tax returns Jane Jackson's Filled-in Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns $11,000         2. Student tax returns Enter one-half of line 1 2. Student tax returns 5,500     3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns 25,500     4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns -0-     5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns -0-     6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 31,000     7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns -0-     8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns 31,000     9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns 25,000       Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns 6,000     11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns 9,000     12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns -0-     13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns 6,000     14. Student tax returns Enter one-half of line 13 14. Student tax returns 3,000     15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns 3,000     16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns -0-     17. Student tax returns Add lines 15 and 16 17. Student tax returns 3,000     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns 9,350     19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns $3,000       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Jane Jackson's Filled-in Worksheet 2. Student tax returns Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 2012 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Student tax returns $2,000           Note. Student tax returns If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Student tax returns Otherwise, go on to line 2. Student tax returns             2. Student tax returns Enter one-half of line 1 2. Student tax returns 1,000   3. Student tax returns Enter your adjusted gross income for the earlier year 3. Student tax returns 23,000   4. Student tax returns Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Student tax returns S. Student tax returns savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Student tax returns -0-   5. Student tax returns Enter any tax-exempt interest received in the earlier year 5. Student tax returns -0-   6. Student tax returns Add lines 2 through 5 6. Student tax returns 24,000   7. Student tax returns Enter your taxable benefits for the earlier year that you previously reported 7. Student tax returns -0-   8. Student tax returns Subtract line 7 from line 6 8. Student tax returns 24,000   9. Student tax returns If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Student tax returns 25,000     Note. Student tax returns If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 8 more than the amount on line 9?       No. Student tax returns Skip lines 10 through 20 and enter -0- on line 21. Student tax returns       Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns     11. Student tax returns Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Student tax returns     12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns     13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns     14. Student tax returns Enter one-half of line 13 14. Student tax returns     15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns     16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns     17. Student tax returns Add lines 15 and 16 17. Student tax returns     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns     19. Student tax returns Refigured taxable benefits. Student tax returns Enter the smaller of line 17 or line 18 19. Student tax returns     20. Student tax returns Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Student tax returns     21. Student tax returns Additional taxable benefits. Student tax returns Subtract line 20 from line 19. Student tax returns Also enter this amount on Worksheet 4, line 20 21. Student tax returns -0-     Do not file an amended return for this earlier year. Student tax returns Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Student tax returns   Jane Jackson's Filled-in Worksheet 4. Student tax returns Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3)     Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for 2013, minus the lump-sum payment for years before 2013 1. Student tax returns $9,000         Note. Student tax returns If line 1 is zero or less, skip lines 2 through 18, enter -0- on line 19 and go to line 20. Student tax returns Otherwise, go on to line 2. Student tax returns           2. Student tax returns Enter one-half of line 1 2. Student tax returns 4,500   3. Student tax returns Enter the amount from Worksheet 1, line 3 3. Student tax returns 25,500   4. Student tax returns Enter the amount from Worksheet 1, line 4 4. Student tax returns -0-   5. Student tax returns Enter the amount from Worksheet 1, line 5 5. Student tax returns -0-   6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns 30,000   7. Student tax returns Enter the amount from Worksheet 1, line 7 7. Student tax returns -0-   8. Student tax returns Subtract line 7 from line 6 8. Student tax returns 30,000   9. Student tax returns Enter the amount from Worksheet 1, line 9. Student tax returns But if you are married filing separately and lived with your spouse at any time during 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then, go to line 18 9. Student tax returns 25,000   10. Student tax returns Is the amount on line 8 more than the amount on line 9? No. Student tax returns Skip lines 10 through 18, enter -0- on line 19, and go to line 20. Student tax returns  Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns 5,000   11. Student tax returns Enter the amount from Worksheet 1, line 11 11. Student tax returns 9,000   12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns -0-   13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns 5,000   14. Student tax returns Enter one-half of line 13 14. Student tax returns 2,500   15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns 2,500   16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns -0-   17. Student tax returns Add lines 15 and 16 17. Student tax returns 2,500   18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns 7,650   19. Student tax returns Enter the smaller of line 17 or line 18 19. Student tax returns 2,500   20. Student tax returns Enter the total of the amounts from Worksheet 2, line 21, and Worksheet 3, line 14, for all earlier years for which the lump-sum payment was received 20. Student tax returns -0-   21. Student tax returns Taxable benefits under lump-sum election method. Student tax returns Add lines 19 and 20 21. Student tax returns $2,500   Next. Student tax returns Is line 21 above smaller than Worksheet 1, line 19? No. Student tax returns Do not use this method to figure your taxable benefits. Student tax returns Follow the instructions on Worksheet 1 to report your benefits. Student tax returns  Yes. Student tax returns You can elect to report your taxable benefits under this method. Student tax returns To elect this method:     Enter “LSE” to the left of Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns If line 21 above is zero, follow the instructions in line 10 for “No” on Worksheet 1. Student tax returns Otherwise: Enter the amount from Worksheet 1, line 1, on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns Enter the amount from line 21 above on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns   Deductions Related to Your Benefits You may be entitled to deduct certain amounts related to the benefits you receive. Student tax returns Disability payments. Student tax returns   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. Student tax returns If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. Student tax returns If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Student tax returns Claim the deduction or credit in the same way explained under Repayment of benefits received in an earlier year in the section Repayments More Than Gross Benefits , later. Student tax returns Legal expenses. Student tax returns   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. Student tax returns   Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Student tax returns Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Student tax returns If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Student tax returns Do not use Worksheet 1 in this case. Student tax returns If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Student tax returns If you have any questions about this negative figure, contact your local SSA office or your local RRB field office. Student tax returns Joint return. Student tax returns   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. Student tax returns You do this to get your net benefits when figuring if your combined benefits are taxable. Student tax returns Example. Student tax returns John and Mary file a joint return for 2013. Student tax returns John received Form SSA-1099 showing $3,000 in box 5. Student tax returns Mary also received Form SSA-1099 and the amount in box 5 was ($500). Student tax returns John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable. Student tax returns Repayment of benefits received in an earlier year. Student tax returns   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Student tax returns Deduction $3,000 or less. Student tax returns   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Student tax returns Claim it on Schedule A (Form 1040), line 23. Student tax returns Deduction more than $3,000. Student tax returns   If this deduction is more than $3,000, you should figure your tax two ways: Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28. Student tax returns Figure your tax for 2013 in the following steps: Figure the tax without the itemized deduction included on Schedule A, line 28. Student tax returns For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Student tax returns Then refigure the tax for that year. Student tax returns Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts. Student tax returns Subtract the result in (c) from the result in (a). Student tax returns   Compare the tax figured in methods (1) and (2). Student tax returns Your tax for 2013 is the smaller of the two amounts. Student tax returns If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. Student tax returns If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. Student tax returns Check box d and enter “I. Student tax returns R. Student tax returns C. Student tax returns 1341” in the space next to that box. Student tax returns If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28. Student tax returns Worksheets Blank Worksheets 1 through 4 are provided in this section: Worksheet 1, Figuring Your Taxable Benefits; Worksheet 2, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993); Worksheet 3, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994); Worksheet 4, Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3). Student tax returns Worksheet 1. Student tax returns Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Student tax returns Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Student tax returns None of your benefits are taxable for 2013. Student tax returns For more information, see Repayments More Than Gross Benefits . Student tax returns If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Student tax returns S. Student tax returns Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Student tax returns Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Student tax returns 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Student tax returns Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Student tax returns           2. Student tax returns Enter one-half of line 1 2. Student tax returns       3. Student tax returns Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Student tax returns       4. Student tax returns Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Student tax returns       5. Student tax returns Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Student tax returns       6. Student tax returns Combine lines 2, 3, 4, and 5 6. Student tax returns       7. Student tax returns Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Student tax returns  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Student tax returns       8. Student tax returns Is the amount on line 7 less than the amount on line 6?             No. Student tax returns None of your social security benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Student tax returns             Yes. Student tax returns Subtract line 7 from line 6 8. Student tax returns       9. Student tax returns If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Student tax returns         Note. Student tax returns If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 9 less than the amount on line 8?             No. Student tax returns None of your benefits are taxable. Student tax returns Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Student tax returns If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Student tax returns             Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns       11. Student tax returns Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Student tax returns       12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns       13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns       14. Student tax returns Enter one-half of line 13 14. Student tax returns       15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns       16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns       17. Student tax returns Add lines 15 and 16 17. Student tax returns       18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns       19. Student tax returns Taxable benefits. Student tax returns Enter the smaller of line 17 or line 18. Student tax returns Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Student tax returns         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Student tax returns         Worksheet 2. Student tax returns Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Student tax returns             Note. Student tax returns If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Student tax returns Otherwise, go on to line 2. Student tax returns             2. Student tax returns Enter one-half of line 1 2. Student tax returns     3. Student tax returns Enter your adjusted gross income for the earlier year 3. Student tax returns     4. Student tax returns Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Student tax returns S. Student tax returns savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Student tax returns     5. Student tax returns Enter any tax-exempt interest received in the earlier year 5. Student tax returns     6. Student tax returns Add lines 2 through 5 6. Student tax returns     7. Student tax returns Enter your taxable benefits for the earlier year that you previously reported 7. Student tax returns     8. Student tax returns Subtract line 7 from line 6 8. Student tax returns     9. Student tax returns If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Student tax returns       Note. Student tax returns If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Student tax returns 85) and enter the result on line 17. Student tax returns Then go to line 18. Student tax returns         10. Student tax returns Is the amount on line 8 more than the amount on line 9?       No. Student tax returns Skip lines 10 through 20 and enter -0- on line 21. Student tax returns       Yes. Student tax returns Subtract line 9 from line 8 10. Student tax returns     11. Student tax returns Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Student tax returns     12. Student tax returns Subtract line 11 from line 10. Student tax returns If zero or less, enter -0- 12. Student tax returns     13. Student tax returns Enter the smaller of line 10 or line 11 13. Student tax returns     14. Student tax returns Enter one-half of line 13 14. Student tax returns     15. Student tax returns Enter the smaller of line 2 or line 14 15. Student tax returns     16. Student tax returns Multiply line 12 by 85% (. Student tax returns 85). Student tax returns If line 12 is zero, enter -0- 16. Student tax returns     17. Student tax returns Add lines 15 and 16 17. Student tax returns     18. Student tax returns Multiply line 1 by 85% (. Student tax returns 85) 18. Student tax returns     19. Student tax returns Refigured taxable benefits. Student tax returns Enter the smaller of line 17 or line 18 19. Student tax returns     20. Student tax returns Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Student tax returns     21. Student tax returns Additional taxable benefits. Student tax returns Subtract line 20 from line 19. Student tax returns Also enter this amount on Worksheet 4, line 20 21. Student tax returns       Do not file an amended return for this earlier year. Student tax returns Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Student tax returns   Worksheet 3. Student tax returns Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994) Enter earlier year 1. Student tax returns Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Student tax returns           Note. Student tax returns If line 1 is zero or less, skip lines 2 through 13 and enter -0- on line 14. Student tax returns Otherwise, go on to line 2. Student tax returns           2. Student tax returns Enter one-half of line 1 2. Student tax returns     3. Student tax returns Enter your adjusted gross income for the earlier year 3. Student tax returns     4. Student tax returns Enter the total of any exclusions/adjustments you claimed in the earlier year for: Qualified U. Student tax returns S. Student tax returns savings bond interest (Form 8815) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Student tax returns     5. Student tax returns Enter any tax-exempt interest received in the earlier year 5. Student tax returns     6. Student tax returns Add lines 2 through 5 6. Student tax returns     7. Student tax returns Enter your taxable benefits for the earlier year that you previously reported 7. Student tax returns     8. Student tax returns Subtract line 7 from line 6 8. Student tax returns     9. Student tax returns Enter $25,000 ($32,000 if married filing jointly for the earlier year; $-0- if married filing separately for the earlier year and you lived with your spouse at any time during the earlier year) 9. Student tax returns     10. Student tax returns Is the amount on line 8 more than the amount on line 9? No. Student tax returns Skip lines 10 through 13 and enter -0- on line 14. Student tax returns  Yes. Student tax returns Subtract line 9 from line 8. Student tax returns 10. Student tax returns     11. Student tax returns Enter one-half of line 10 11. Student tax returns     12. Student tax returns Refigured taxable benefits. Student tax returns Enter the smaller of line 2 or line 11 12. Student tax returns     13. Student tax returns Enter your taxable benefits for the earlier year (or as refigured due to a previous
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Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations

Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input

IR-2013-92, Nov. 26, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The proposed guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1. Communications

  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.

2. Grants and Contributions

  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).

3.  Activities Closely Related to Elections or Candidates

  • Voter registration drives and “get-out-the-vote” drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.

The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

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Page Last Reviewed or Updated: 02-Dec-2013

The Student Tax Returns

Student tax returns Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Student tax returns Cost Basis The basis of property you buy is usually its cost. Student tax returns The cost is the amount you pay in cash, debt obligations, other property, or services. Student tax returns Your cost also includes amounts you pay for the following items. Student tax returns Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). Student tax returns  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. Student tax returns Loans with low or no interest. Student tax returns   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Student tax returns You generally have unstated interest if your interest rate is less than the applicable federal rate. Student tax returns For more information, see Unstated Interest and Original Issue Discount in Publication 537. Student tax returns Purchase of a business. Student tax returns   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. Student tax returns Allocate the price among the various assets, including any section 197 intangibles. Student tax returns See Allocating the Basis, later. Student tax returns Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Student tax returns If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. Student tax returns You must adjust the basis of stocks for certain events that occur after purchase. Student tax returns See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. Student tax returns Identifying stock or bonds sold. Student tax returns   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Student tax returns If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Student tax returns For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Student tax returns Mutual fund shares. Student tax returns   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. Student tax returns For more information, see Publication 550. Student tax returns Real Property Real property, also called real estate, is land and generally anything built on or attached to it. Student tax returns If you buy real property, certain fees and other expenses become part of your cost basis in the property. Student tax returns Real estate taxes. Student tax returns   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Student tax returns You cannot deduct them as taxes. Student tax returns   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Student tax returns Do not include that amount in the basis of the property. Student tax returns If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Student tax returns Settlement costs. Student tax returns   Your basis includes the settlement fees and closing costs for buying property. Student tax returns You cannot include in your basis the fees and costs for getting a loan on property. Student tax returns A fee for buying property is a cost that must be paid even if you bought the property for cash. Student tax returns   The following items are some of the settlement fees or closing costs you can include in the basis of your property. Student tax returns Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Student tax returns   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Student tax returns   The following items are some settlement fees and closing costs you cannot include in the basis of the property. Student tax returns Casualty insurance premiums. Student tax returns Rent for occupancy of the property before closing. Student tax returns Charges for utilities or other services related to occupancy of the property before closing. Student tax returns Charges connected with getting a loan. Student tax returns The following are examples of these charges. Student tax returns Points (discount points, loan origination fees). Student tax returns Mortgage insurance premiums. Student tax returns Loan assumption fees. Student tax returns Cost of a credit report. Student tax returns Fees for an appraisal required by a lender. Student tax returns Fees for refinancing a mortgage. Student tax returns If these costs relate to business property, items (1) through (3) are deductible as business expenses. Student tax returns Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. Student tax returns Points. Student tax returns   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Student tax returns Generally, you deduct the points over the term of the loan. Student tax returns For more information on how to deduct points, see Points in chapter 4 of Publication 535. Student tax returns Points on home mortgage. Student tax returns   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. Student tax returns If certain requirements are met, you can deduct the points in full for the year in which they are paid. Student tax returns Reduce the basis of your home by any seller-paid points. Student tax returns For more information, see Points in Publication 936, Home Mortgage Interest Deduction. Student tax returns Assumption of mortgage. Student tax returns   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Student tax returns Example. Student tax returns If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. Student tax returns Constructing assets. Student tax returns   If you build property or have assets built for you, your expenses for this construction are part of your basis. Student tax returns Some of these expenses include the following costs. Student tax returns Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Student tax returns In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. Student tax returns You must include them in the asset's basis. Student tax returns Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. Student tax returns    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Student tax returns Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. Student tax returns If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. Student tax returns In certain circumstances, you may be subject to the uniform capitalization rules, next. Student tax returns Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. Student tax returns Activities subject to the rules. Student tax returns   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. Student tax returns Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. Student tax returns However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. Student tax returns   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. Student tax returns Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. Student tax returns Tangible personal property includes films, sound recordings, video tapes, books, or similar property. Student tax returns    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. Student tax returns To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. Student tax returns You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Student tax returns   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. Student tax returns Example. Student tax returns If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. Student tax returns The nondeductible part of the cost is not subject to the uniform capitalization rules. Student tax returns More information. Student tax returns   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. Student tax returns Exceptions. Student tax returns   The following are not subject to the uniform capitalization rules. Student tax returns Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. Student tax returns For other exceptions to the uniform capitalization rules, see section 1. Student tax returns 263A-1(b) of the regulations. Student tax returns   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. Student tax returns Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. Student tax returns The basis of an intangible asset is usually the cost to buy or create it. Student tax returns If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. Student tax returns The basis of certain intangibles can be amortized. Student tax returns See chapter 8 of Publication 535 for information on the amortization of these costs. Student tax returns Patents. Student tax returns   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. Student tax returns If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. Student tax returns The value of the inventor's time spent on an invention is not part of the basis. Student tax returns Copyrights. Student tax returns   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. Student tax returns Do not include the value of your time as the author, or any other person's time you did not pay for. Student tax returns Franchises, trademarks, and trade names. Student tax returns   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. Student tax returns Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. Student tax returns You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Student tax returns See Trade or Business Acquired below. Student tax returns Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. Student tax returns If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Student tax returns However, see Trade or Business Acquired, next. Student tax returns Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. Student tax returns Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. Student tax returns Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. Student tax returns Certificates of deposit, U. Student tax returns S. Student tax returns Government securities, foreign currency, and actively traded personal property, including stock and securities. Student tax returns Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. Student tax returns Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held primarily for sale to customers in the ordinary course of business. Student tax returns All other assets except section 197 intangibles, goodwill, and going concern value. Student tax returns Section 197 intangibles except goodwill and going concern value. Student tax returns Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Student tax returns Agreement. Student tax returns   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. Student tax returns This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Student tax returns Reporting requirement. Student tax returns   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Student tax returns Use Form 8594 to provide this information. Student tax returns The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Student tax returns More information. Student tax returns   See Sale of a Business in chapter 2 of Publication 544 for more information. Student tax returns Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. Student tax returns Figure the basis of each asset by multiplying the lump sum by a fraction. Student tax returns The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Student tax returns If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. Student tax returns Demolition of building. Student tax returns   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Student tax returns Do not claim the costs as a current deduction. Student tax returns Modification of building. Student tax returns   A modification of a building will not be treated as a demolition if the following conditions are satisfied. Student tax returns 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. Student tax returns   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. Student tax returns   If these conditions are met, add the costs of the modifications to the basis of the building. Student tax returns Subdivided lots. Student tax returns   If you buy a tract of land and subdivide it, you must determine the basis of each lot. Student tax returns This is necessary because you must figure the gain or loss on the sale of each individual lot. Student tax returns As a result, you do not recover your entire cost in the tract until you have sold all of the lots. Student tax returns   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. Student tax returns The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. Student tax returns Future improvement costs. Student tax returns   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. Student tax returns See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. Student tax returns Use of erroneous cost basis. Student tax returns   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. Student tax returns Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. Student tax returns Example. Student tax returns You bought a tract of land to which you assigned a cost of $15,000. Student tax returns You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. Student tax returns You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. Student tax returns Several years later you determine that your original basis in the tract was $22,500 and not $15,000. Student tax returns You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. Student tax returns You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). Student tax returns You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. Student tax returns Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. Student tax returns The result of these adjustments to the basis is the adjusted basis. Student tax returns Increases to Basis Increase the basis of any property by all items properly added to a capital account. Student tax returns These include the cost of any improvements having a useful life of more than 1 year. Student tax returns Rehabilitation expenses also increase basis. Student tax returns However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. Student tax returns If you have to recapture any of the credit, increase your basis by the recaptured amount. Student tax returns If you make additions or improvements to business property, keep separate accounts for them. Student tax returns Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. Student tax returns For more information, see Publication 946. Student tax returns The following items increase the basis of property. Student tax returns The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. Student tax returns Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. Student tax returns Do not deduct them as taxes. Student tax returns However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. Student tax returns Example. Student tax returns Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. Student tax returns Add the assessment to your property's basis. Student tax returns In this example, the assessment is a depreciable asset. Student tax returns Deducting vs. Student tax returns Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. Student tax returns For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. Student tax returns However, you can choose either to deduct or to capitalize certain other costs. Student tax returns If you capitalize these costs, include them in your basis. Student tax returns If you deduct them, do not include them in your basis. Student tax returns See Uniform Capitalization Rules earlier. Student tax returns The costs you can choose to deduct or to capitalize include the following. Student tax returns Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. Student tax returns If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Student tax returns For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. Student tax returns Table 1. Student tax returns Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. Student tax returns Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. Student tax returns Some of these items are discussed next. Student tax returns Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. Student tax returns You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. Student tax returns To make this determination, compare the repaired property to the property before the casualty. Student tax returns For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Student tax returns Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. Student tax returns It reduces the basis of the affected part of the property. Student tax returns If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Student tax returns Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. Student tax returns For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. Student tax returns Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. Student tax returns This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. Student tax returns If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. Student tax returns Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Student tax returns For more information about the section 179 deduction, see Publication 946. Student tax returns Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. Student tax returns Reduce the basis of the property for which you received the subsidy by the excluded amount. Student tax returns For more information on this subsidy, see Publication 525. Student tax returns Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Student tax returns If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Student tax returns If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Student tax returns Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. Student tax returns If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. Student tax returns In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. Student tax returns For information on figuring depreciation, see Publication 946. Student tax returns If you are claiming depreciation on a business vehicle, see Publication 463. Student tax returns If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. Student tax returns Include the excess depreciation in your gross income and add it to your basis in the property. Student tax returns For information on the computation of excess depreciation, see chapter 4 in Publication 463. Student tax returns Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Student tax returns A debt includes any indebtedness for which you are liable or which attaches to property you hold. Student tax returns You can exclude canceled debt from income in the following situations. Student tax returns Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). Student tax returns If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Student tax returns However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. Student tax returns For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. Student tax returns For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. Student tax returns For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. Student tax returns Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. Student tax returns For more information on the rules for the sale of a home, see Publication 523. Student tax returns Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. Student tax returns This also applies to amounts you received under an employer's adoption assistance program and excluded from income. Student tax returns For more information Form 8839, Qualified Adoption Expenses. Student tax returns Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. Student tax returns You must reduce your basis in that property by the credit claimed. Student tax returns For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. Student tax returns Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. Student tax returns You also paid commissions of $2,000 and title search and legal fees of $600. Student tax returns You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. Student tax returns Immediately you spent $20,000 in remodeling the building before you placed it in service. Student tax returns You were allowed depreciation of $14,526 for the years 2005 through 2009. Student tax returns In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. Student tax returns You claimed a deduction for this loss. Student tax returns You spent $5,500 to repair the damages and extend the useful life of the building. Student tax returns The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. Student tax returns It is not affected by any of the above adjustments. Student tax returns Basis Other Than Cost There are many times when you cannot use cost as basis. Student tax returns In these cases, the fair market value or the adjusted basis of property may be used. Student tax returns Adjusted basis is discussed earlier. Student tax returns Fair market value (FMV). Student tax returns   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Student tax returns Sales of similar property on or about the same date may be helpful in figuring the property's FMV. Student tax returns Property Received for Services If you receive property for services, include the property's FMV in income. Student tax returns The amount you include in income becomes your basis. Student tax returns If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Student tax returns Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. Student tax returns If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Student tax returns Your basis in the property is its FMV (your purchase price plus the amount you include in income). Student tax returns If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. Student tax returns However, your basis in the property is still its FMV. Student tax returns See Employee Discounts in Publication 15-B. Student tax returns Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. Student tax returns Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. Student tax returns There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. Student tax returns When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. Student tax returns Example. Student tax returns Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. Student tax returns The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. Student tax returns You do not report any income until you have completed the 5 years of service that satisfy the condition. Student tax returns Fair market value. Student tax returns   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. Student tax returns Example. Student tax returns You received stock from your employer for services you performed. Student tax returns If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. Student tax returns At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. Student tax returns This is a restriction that by its terms will never end and you must consider it when you figure the FMV. Student tax returns Election. Student tax returns   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. Student tax returns If you make this choice, the substantially vested rules do not apply. Student tax returns Your basis is the amount you paid plus the amount you included in income. Student tax returns   See the discussion of Restricted Property in Publication 525 for more information. Student tax returns Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Student tax returns A taxable gain or deductible loss is also known as a recognized gain or loss. Student tax returns If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. Student tax returns A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. Student tax returns Example. Student tax returns You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. Student tax returns You must report a taxable gain of $3,000 for the land. Student tax returns The tractor has a basis of $6,000. Student tax returns Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. Student tax returns Similar or related property. Student tax returns   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. Student tax returns However, make the following adjustments. Student tax returns Decrease the basis by the following. Student tax returns Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. Student tax returns Increase the basis by the following. Student tax returns Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. Student tax returns Money or property not similar or related. Student tax returns   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. Student tax returns Example. Student tax returns The state condemned your property. Student tax returns The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. Student tax returns You realized a gain of $5,000 ($31,000 − $26,000). Student tax returns You bought replacement property similar in use to the converted property for $29,000. Student tax returns You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Student tax returns Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Student tax returns The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. Student tax returns   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Student tax returns Example. Student tax returns The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. Student tax returns Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. Student tax returns More information. Student tax returns   For more information about condemnations, see Involuntary Conversions in Publication 544. Student tax returns For more information about casualty and theft losses, see Publication 547. Student tax returns Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Student tax returns If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Student tax returns A nontaxable gain or loss is also known as an unrecognized gain or loss. Student tax returns Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Student tax returns To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Student tax returns There must also be an exchange of like-kind property. Student tax returns For more information, see Like-Kind Exchanges in Publication 544. Student tax returns The basis of the property you receive is the same as the basis of the property you gave up. Student tax returns Example. Student tax returns You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. Student tax returns Your basis in the new property is the same as the basis of the old ($50,000). Student tax returns Exchange expenses. Student tax returns   Exchange expenses are generally the closing costs you pay. Student tax returns They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. Student tax returns Add them to the basis of the like-kind property received. Student tax returns Property plus cash. Student tax returns   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. Student tax returns Example. Student tax returns You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. Student tax returns Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). Student tax returns Special rules for related persons. Student tax returns   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Student tax returns Each person must report any gain or loss not recognized on the original exchange. Student tax returns Each person reports it on the tax return filed for the year in which the later disposition occurs. Student tax returns If this rule applies, the basis of the property received in the original exchange will be its fair market value. Student tax returns   These rules generally do not apply to the following kinds of property dispositions. Student tax returns Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. Student tax returns Related persons. Student tax returns   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. Student tax returns   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. Student tax returns ), see Nondeductible Loss in chapter 2 of Publication 544. Student tax returns Exchange of business property. Student tax returns   Exchanging the assets of one business for the assets of another business is a multiple property exchange. Student tax returns For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Student tax returns Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. Student tax returns The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. Student tax returns Decrease the basis by the following amounts. Student tax returns Any money you receive, and Any loss you recognize on the exchange. Student tax returns Increase the basis by the following amounts. Student tax returns Any additional costs you incur, and Any gain you recognize on the exchange. Student tax returns If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Student tax returns Example. Student tax returns You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. Student tax returns You realized a gain of $200 ($6,200 − $6,000). Student tax returns This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). Student tax returns You include all the gain in income (recognized gain) because the gain is less than the cash received. Student tax returns Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. Student tax returns   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Student tax returns The rest is the basis of the like property. Student tax returns Example. Student tax returns You had an adjusted basis of $15,000 in real estate you held for investment. Student tax returns You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. Student tax returns The truck is unlike property. Student tax returns You realized a gain of $1,500 ($16,500 − $15,000). Student tax returns This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). Student tax returns You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Student tax returns Your basis in the properties you received is figured as follows. Student tax returns Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). Student tax returns This is the truck's FMV. Student tax returns The rest ($12,500) is the basis of the real estate. Student tax returns Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Student tax returns Example. Student tax returns You are a salesperson and you use one of your cars 100% for business. Student tax returns You have used this car in your sales activities for 2 years and have depreciated it. Student tax returns Your adjusted basis in the car is $22,600 and its FMV is $23,100. Student tax returns You are interested in a new car, which sells for $28,000. Student tax returns If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). Student tax returns However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. Student tax returns Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). Student tax returns Your basis for depreciating the new car is $27,500, the same as if you traded the old car. Student tax returns Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. Student tax returns The first is an exchange of like-kind property. Student tax returns The second is personal-use property on which gain is recognized and loss is not recognized. Student tax returns First, figure your adjusted basis in the property as if you transferred two separate properties. Student tax returns Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. Student tax returns Deduct the depreciation you took or could have taken from the adjusted basis of the business part. Student tax returns Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. Student tax returns The business part of the property is permitted to be exchanged tax free. Student tax returns However, you must recognize any gain from the exchange of the nonbusiness part. Student tax returns You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. Student tax returns The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. Student tax returns If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. Student tax returns For more information, see Publication 523. Student tax returns Trade of car used partly in business. Student tax returns   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. Student tax returns   For information on figuring your basis for depreciation, see Publication 463. Student tax returns Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. Student tax returns However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. Student tax returns This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Student tax returns If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. Student tax returns Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Student tax returns For more information on these bonds, see Publication 550. Student tax returns At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. Student tax returns For more information, see Publication 504, Divorced or Separated Individuals. Student tax returns Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Student tax returns FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Student tax returns Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. Student tax returns Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). Student tax returns If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. Student tax returns Example. Student tax returns You received an acre of land as a gift. Student tax returns At the time of the gift, the land had an FMV of $8,000. Student tax returns The donor's adjusted basis was $10,000. Student tax returns After you received the land, no events occurred to increase or decrease your basis. Student tax returns If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. Student tax returns If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. Student tax returns If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Student tax returns For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. Student tax returns If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. Student tax returns Business property. Student tax returns   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Student tax returns FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Student tax returns Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Student tax returns Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. Student tax returns See Adjusted Basis earlier. Student tax returns Gift received before 1977. Student tax returns   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. Student tax returns However, do not increase your basis above the FMV of the gift at the time it was given to you. Student tax returns Example 1. Student tax returns You were given a house in 1976 with an FMV of $21,000. Student tax returns The donor's adjusted basis was $20,000. Student tax returns The donor paid a gift tax of $500. Student tax returns Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. Student tax returns Example 2. Student tax returns If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. Student tax returns This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. Student tax returns Gift received after 1976. Student tax returns   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. Student tax returns Figure the increase by multiplying the gift tax paid by a fraction. Student tax returns The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Student tax returns   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. Student tax returns The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Student tax returns For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Student tax returns Example. Student tax returns In 2010, you received a gift of property from your mother that had an FMV of $50,000. Student tax returns Her adjusted basis was $20,000. Student tax returns The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). Student tax returns She paid a gift tax of $9,000. Student tax returns Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . Student tax returns 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. Student tax returns See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Student tax returns If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. Student tax returns The FMV of the property at the date of the individual's death. Student tax returns The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. Student tax returns For information on the alternate valuation date, see the Instructions for Form 706. Student tax returns The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. Student tax returns This method is discussed later. Student tax returns The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Student tax returns For information on a qualified conservation easement, see the Instructions for Form 706. Student tax returns If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Student tax returns For more information, see the Instructions for Form 706. Student tax returns Appreciated property. Student tax returns   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. Student tax returns Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. Student tax returns Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. Student tax returns Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Student tax returns When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Student tax returns For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. Student tax returns For example, you and your spouse owned community property that had a basis of $80,000. Student tax returns When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Student tax returns The FMV of the community interest was $100,000. Student tax returns The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Student tax returns The basis of the other half to your spouse's heirs is also $50,000. Student tax returns For more information on community property, see Publication 555, Community Property. Student tax returns Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Student tax returns Example. Student tax returns John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. Student tax returns John furnished two-thirds of the purchase price and Jim furnished one-third. Student tax returns Depreciation deductions allowed before John's death were $12,000. Student tax returns Under local law, each had a half interest in the income from the property. Student tax returns At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Student tax returns Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. Student tax returns This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. Student tax returns If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. Student tax returns Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. Student tax returns It does not matter how much each spouse contributed to the purchase price. Student tax returns Also, it does not matter which spouse dies first. Student tax returns A qualified joint interest is any interest in property held by husband and wife as either of the following. Student tax returns Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. Student tax returns Basis. Student tax returns   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Student tax returns Decrease the cost by any deductions allowed to you for depreciation and depletion. Student tax returns Increase the reduced cost by your basis in the half you inherited. Student tax returns Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. Student tax returns If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. Student tax returns If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. Student tax returns Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Student tax returns Special-use valuation. Student tax returns   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. Student tax returns Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Student tax returns Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. Student tax returns Figure all FMVs without regard to the special-use valuation. Student tax returns   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Student tax returns This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. Student tax returns   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. Student tax returns If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Student tax returns The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. Student tax returns   You make the election by filing with Form 706-A a statement that does all of the following. Student tax returns Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. Student tax returns   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. Student tax returns Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Student tax returns An example of changing property held for personal use to business use would be renting out your former main home. Student tax returns Basis for depreciation. Student tax returns   The basis for depreciation is the lesser of the following amounts. Student tax returns The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Student tax returns Example. Student tax returns Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. Student tax returns You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Student tax returns Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Student tax returns Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Student tax returns On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Student tax returns The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). Student tax returns Sale of property. Student tax returns   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. Student tax returns Gain. Student tax returns   The basis for figuring a gain is your adjusted basis when you sell the property. Student tax returns Example. Student tax returns Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Student tax returns Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Student tax returns Loss. Student tax returns   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Student tax returns Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. Student tax returns Example. Student tax returns Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Student tax returns In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. Student tax returns Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). Student tax returns How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Student tax returns By selecting the method that is best for you, you will have quick and easy access to tax help. Student tax returns Contacting your Taxpayer Advocate. Student tax returns   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. Student tax returns We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. Student tax returns Here are seven things every taxpayer should know about TAS. Student tax returns TAS is your voice at the IRS. Student tax returns Our service is free, confidential, and tailored to meet your needs. Student tax returns You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Student tax returns We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Student tax returns This includes businesses as well as individuals. Student tax returns Our employees know the IRS and how to navigate it. Student tax returns If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Student tax returns We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Student tax returns You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Student tax returns irs. Student tax returns gov/advocate. Student tax returns You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Student tax returns You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Student tax returns taxtoolkit. Student tax returns irs. Student tax returns gov. Student tax returns You can get updates on hot tax topics by visiting our YouTube channel at www. Student tax returns youtube. Student tax returns com/tasnta and our Facebook page at www. Student tax returns facebook. Student tax returns com/YourVoiceAtIRS, or by following our tweets at www. Student tax returns twitter. Student tax returns com/YourVoiceAtIRS. Student tax returns Low Income Taxpayer Clinics (LITCs). Student tax returns   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Student tax returns LITCs are independent from the IRS. Student tax returns Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Student tax returns If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Student tax returns For more information, see Publication 4134, Low Income Taxpayer Clinic List. Student tax returns This publication is available at IRS. Student tax returns gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Student tax returns Free tax services. Student tax returns   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Student tax returns Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Student tax returns The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Student tax returns The majority of the information and services listed in this publication are available to you free of charge. Student tax returns If there is a fee associated with a resource or service, it is listed in the publication. Student tax returns   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d