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Turbo Tax 2010 2011

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Turbo Tax 2010 2011

Turbo tax 2010 2011 Publication 929 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Turbo tax 2010 2011 Tax questions. Turbo tax 2010 2011 Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 929, such as legislation enacted after this publication was published, go to www. Turbo tax 2010 2011 irs. Turbo tax 2010 2011 gov/pub929. Turbo tax 2010 2011 Reminders Social security number (SSN). Turbo tax 2010 2011  Dependents who are required to file a tax return must have an SSN. Turbo tax 2010 2011 To apply for an SSN, file Form SS-5 with the Social Security Administration. Turbo tax 2010 2011 You can go to the website www. Turbo tax 2010 2011 socialsecurity. Turbo tax 2010 2011 gov for more information. Turbo tax 2010 2011 Individual taxpayer identification number (ITIN). Turbo tax 2010 2011  The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get an SSN. Turbo tax 2010 2011 To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. Turbo tax 2010 2011 It takes 6-10 weeks to get an ITIN. Turbo tax 2010 2011 The ITIN is entered wherever an SSN is requested on a tax return. Turbo tax 2010 2011 If you are a nonresident alien applying for an ITIN to file a tax return, you generally must attach your original, completed return to Form W-7 to get an ITIN. Turbo tax 2010 2011 See the Form W-7 instructions for more information. Turbo tax 2010 2011 An ITIN is for tax use only. Turbo tax 2010 2011 It does not entitle you to social security benefits or change your employment or immigration status under U. Turbo tax 2010 2011 S. Turbo tax 2010 2011 law. Turbo tax 2010 2011 Effective January 1, 2013, ITINs will expire after 5 years. Turbo tax 2010 2011 Taxpayers who still need an ITIN after the end of the expiration period must reapply for a number. Turbo tax 2010 2011 Photographs of missing children. Turbo tax 2010 2011  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Turbo tax 2010 2011 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Turbo tax 2010 2011 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Turbo tax 2010 2011 Introduction Part 1 of this publication explains the filing requirements and other tax information for individuals who can be claimed as a dependent on another person's tax return. Turbo tax 2010 2011  Part 2 explains how to report and figure the tax on unearned income of certain children (whether or not they can be claimed as dependents). Turbo tax 2010 2011 Definitions. Turbo tax 2010 2011   Many of the terms used in this publication, such as “dependent,” “earned income,” and “unearned income,” are defined in the Glossary at the back of this publication. Turbo tax 2010 2011 Comments and suggestions. Turbo tax 2010 2011   We welcome your comments about this publication and your suggestions for future editions. Turbo tax 2010 2011   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Turbo tax 2010 2011 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Turbo tax 2010 2011 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Turbo tax 2010 2011   You can send your comments from www. Turbo tax 2010 2011 irs. Turbo tax 2010 2011 gov/formspubs/. Turbo tax 2010 2011 Click on “More Information” and then on “Comment on Tax Forms and Publications. Turbo tax 2010 2011 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Turbo tax 2010 2011 Ordering forms and publications. Turbo tax 2010 2011   Visit www. Turbo tax 2010 2011 irs. Turbo tax 2010 2011 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Turbo tax 2010 2011 Internal Revenue Service 1201 N. Turbo tax 2010 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Turbo tax 2010 2011   If you have a tax question, check the information available on IRS. Turbo tax 2010 2011 gov or call 1-800-829-1040. Turbo tax 2010 2011 We cannot answer tax questions sent to either of the above addresses. Turbo tax 2010 2011 Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 550 Investment Income and Expenses Form (and Instructions) W-4 Employee's Withholding Allowance Certificate 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Turbo tax 2010 2011 Prev  Up  Next   Home   More Online Publications
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The Turbo Tax 2010 2011

Turbo tax 2010 2011 9. Turbo tax 2010 2011   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Turbo tax 2010 2011 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Turbo tax 2010 2011 Amount to report as ordinary income. Turbo tax 2010 2011 Applicable percentage. Turbo tax 2010 2011 Amount to report as ordinary income. Turbo tax 2010 2011 Applicable percentage. Turbo tax 2010 2011 Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Turbo tax 2010 2011 When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Turbo tax 2010 2011 Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Turbo tax 2010 2011 Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Turbo tax 2010 2011 Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Turbo tax 2010 2011 Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Turbo tax 2010 2011 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Turbo tax 2010 2011 Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Turbo tax 2010 2011 Table 9-1. Turbo tax 2010 2011 Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Turbo tax 2010 2011 Held 24 mos. Turbo tax 2010 2011  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Turbo tax 2010 2011 Held 12 mos. Turbo tax 2010 2011   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Turbo tax 2010 2011 Do not take that gain into account as section 1231 gain. Turbo tax 2010 2011 Section 1231 transactions. Turbo tax 2010 2011   Gain or loss on the following transactions is subject to section 1231 treatment. Turbo tax 2010 2011 Sale or exchange of cattle and horses. Turbo tax 2010 2011 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Turbo tax 2010 2011 Sale or exchange of other livestock. Turbo tax 2010 2011 This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Turbo tax 2010 2011 Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Turbo tax 2010 2011 Other livestock does not include poultry. Turbo tax 2010 2011 Sale or exchange of depreciable personal property. Turbo tax 2010 2011 This property must be used in your business and held longer than 1 year. Turbo tax 2010 2011 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Turbo tax 2010 2011 Examples of depreciable personal property include farm machinery and trucks. Turbo tax 2010 2011 It also includes amortizable section 197 intangibles. Turbo tax 2010 2011 Sale or exchange of real estate. Turbo tax 2010 2011 This property must be used in your business and held longer than 1 year. Turbo tax 2010 2011 Examples are your farm or ranch (including barns and sheds). Turbo tax 2010 2011 Sale or exchange of unharvested crops. Turbo tax 2010 2011 The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Turbo tax 2010 2011 You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Turbo tax 2010 2011 Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Turbo tax 2010 2011 Distributive share of partnership gains and losses. Turbo tax 2010 2011 Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Turbo tax 2010 2011 Cutting or disposal of timber. Turbo tax 2010 2011 Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . Turbo tax 2010 2011 Condemnation. Turbo tax 2010 2011 The condemned property (defined in chapter 11) must have been held longer than 1 year. Turbo tax 2010 2011 It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Turbo tax 2010 2011 It cannot be property held for personal use. Turbo tax 2010 2011 Casualty or theft. Turbo tax 2010 2011 The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Turbo tax 2010 2011 You must have held the property longer than 1 year. Turbo tax 2010 2011 However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Turbo tax 2010 2011 Section 1231 does not apply to personal casualty gains and losses. Turbo tax 2010 2011 See chapter 11 for information on how to treat those gains and losses. Turbo tax 2010 2011 If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Turbo tax 2010 2011 See Table 9-1. Turbo tax 2010 2011 Property for sale to customers. Turbo tax 2010 2011   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Turbo tax 2010 2011 If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Turbo tax 2010 2011 Treatment as ordinary or capital. Turbo tax 2010 2011   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Turbo tax 2010 2011 If you have a net section 1231 loss, it is an ordinary loss. Turbo tax 2010 2011 If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Turbo tax 2010 2011 The rest, if any, is long-term capital gain. Turbo tax 2010 2011 Nonrecaptured section 1231 losses. Turbo tax 2010 2011   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. Turbo tax 2010 2011 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Turbo tax 2010 2011 Example. Turbo tax 2010 2011 In 2013, Ben has a $2,000 net section 1231 gain. Turbo tax 2010 2011 To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Turbo tax 2010 2011 From 2008 through 2012 he had the following section 1231 gains and losses. Turbo tax 2010 2011 Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Turbo tax 2010 2011 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Turbo tax 2010 2011 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. Turbo tax 2010 2011 To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Turbo tax 2010 2011 For more information, see chapter 3 of Publication 544. Turbo tax 2010 2011 Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. Turbo tax 2010 2011 Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Turbo tax 2010 2011 See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Turbo tax 2010 2011 Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Turbo tax 2010 2011 Personal property (either tangible or intangible). Turbo tax 2010 2011 Other tangible property (except buildings and their structural components) used as any of the following. Turbo tax 2010 2011 See Buildings and structural components below. Turbo tax 2010 2011 An integral part of manufacturing, production, or extraction, or of furnishing certain services. Turbo tax 2010 2011 A research facility in any of the activities in (a). Turbo tax 2010 2011 A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Turbo tax 2010 2011 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Turbo tax 2010 2011 Amortization of certified pollution control facilities. Turbo tax 2010 2011 The section 179 expense deduction. Turbo tax 2010 2011 Deduction for clean-fuel vehicles and certain refueling property. Turbo tax 2010 2011 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Turbo tax 2010 2011 Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Turbo tax 2010 2011 Single purpose agricultural (livestock) or horticultural structures. Turbo tax 2010 2011 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Turbo tax 2010 2011 Buildings and structural components. Turbo tax 2010 2011   Section 1245 property does not include buildings and structural components. Turbo tax 2010 2011 The term building includes a house, barn, warehouse, or garage. Turbo tax 2010 2011 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Turbo tax 2010 2011   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Turbo tax 2010 2011 Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Turbo tax 2010 2011   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Turbo tax 2010 2011 Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Turbo tax 2010 2011 Facility for bulk storage of fungible commodities. Turbo tax 2010 2011   This is a facility used mainly for the bulk storage of fungible commodities. Turbo tax 2010 2011 Bulk storage means storage of a commodity in a large mass before it is used. Turbo tax 2010 2011 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Turbo tax 2010 2011 To be fungible, a commodity must be such that one part may be used in place of another. Turbo tax 2010 2011 Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Turbo tax 2010 2011 The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Turbo tax 2010 2011 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Turbo tax 2010 2011 For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Turbo tax 2010 2011 For details, see chapter 3 of Publication 544. Turbo tax 2010 2011 Use Part III of Form 4797 to figure the ordinary income part of the gain. Turbo tax 2010 2011 Depreciation claimed on other property or claimed by other taxpayers. Turbo tax 2010 2011   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Turbo tax 2010 2011 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Turbo tax 2010 2011 For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Turbo tax 2010 2011 Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). Turbo tax 2010 2011 Example. Turbo tax 2010 2011 Jeff Free paid $120,000 for a tractor in 2012. Turbo tax 2010 2011 On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Turbo tax 2010 2011 To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Turbo tax 2010 2011 Jeff can also depreciate the additional $30,000 for the chopper. Turbo tax 2010 2011 Depreciation and amortization. Turbo tax 2010 2011   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Turbo tax 2010 2011 See Depreciation Recapture in chapter 3 of Publication 544 for more details. Turbo tax 2010 2011 Ordinary depreciation deductions. Turbo tax 2010 2011 Section 179 deduction (see chapter 7). Turbo tax 2010 2011 Any special depreciation allowance. Turbo tax 2010 2011 Amortization deductions for all the following costs. Turbo tax 2010 2011 Acquiring a lease. Turbo tax 2010 2011 Lessee improvements. Turbo tax 2010 2011 Pollution control facilities. Turbo tax 2010 2011 Reforestation expenses. Turbo tax 2010 2011 Section 197 intangibles. Turbo tax 2010 2011 Qualified disaster expenses. Turbo tax 2010 2011 Franchises, trademarks, and trade names acquired before August 11, 1993. Turbo tax 2010 2011 Example. Turbo tax 2010 2011 You file your returns on a calendar year basis. Turbo tax 2010 2011 In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Turbo tax 2010 2011 You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Turbo tax 2010 2011 You did not claim the section 179 expense deduction for the truck. Turbo tax 2010 2011 You sold it in May 2013 for $7,000. Turbo tax 2010 2011 The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Turbo tax 2010 2011 Figure the gain treated as ordinary income as follows. Turbo tax 2010 2011 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Turbo tax 2010 2011   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Turbo tax 2010 2011 If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Turbo tax 2010 2011 If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Turbo tax 2010 2011 This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Turbo tax 2010 2011 Disposition of plants and animals. Turbo tax 2010 2011   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Turbo tax 2010 2011 If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Turbo tax 2010 2011 For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Turbo tax 2010 2011 For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Turbo tax 2010 2011 You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Turbo tax 2010 2011 Example. Turbo tax 2010 2011 Janet Maple sold her apple orchard in 2013 for $80,000. Turbo tax 2010 2011 Her adjusted basis at the time of sale was $60,000. Turbo tax 2010 2011 She bought the orchard in 2006, but the trees did not produce a crop until 2009. Turbo tax 2010 2011 Her pre-productive expenses were $6,000. Turbo tax 2010 2011 She elected not to use the uniform capitalization rules. Turbo tax 2010 2011 Janet must treat $6,000 of the gain as ordinary income. Turbo tax 2010 2011 Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Turbo tax 2010 2011 It includes buildings and structural components that are not section 1245 property (discussed earlier). Turbo tax 2010 2011 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Turbo tax 2010 2011 A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Turbo tax 2010 2011 Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Turbo tax 2010 2011 To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Turbo tax 2010 2011 You will not have additional depreciation if any of the following apply to the property disposed of. Turbo tax 2010 2011 You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. Turbo tax 2010 2011 You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Turbo tax 2010 2011 The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Turbo tax 2010 2011 These properties are depreciated using the straight line method. Turbo tax 2010 2011 Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Turbo tax 2010 2011 This applies even if no payments are received in that year. Turbo tax 2010 2011 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Turbo tax 2010 2011 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Turbo tax 2010 2011 If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Turbo tax 2010 2011 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Turbo tax 2010 2011 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Turbo tax 2010 2011 For more information on installment sales, see chapter 10. Turbo tax 2010 2011 Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Turbo tax 2010 2011 By gift. Turbo tax 2010 2011 At death. Turbo tax 2010 2011 In like-kind exchanges. Turbo tax 2010 2011 In involuntary conversions. Turbo tax 2010 2011 Publication 544 also explains how to handle a single transaction involving multiple properties. Turbo tax 2010 2011 Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Turbo tax 2010 2011 Deductions for soil and water conservation expenditures (section 1252 property). Turbo tax 2010 2011 Exclusions from income for certain cost sharing payments (section 1255 property). Turbo tax 2010 2011 Section 1252 property. Turbo tax 2010 2011   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Turbo tax 2010 2011 Exceptions. Turbo tax 2010 2011   Do not treat gain on the following transactions as gain on section 1252 property. Turbo tax 2010 2011 Disposition of farmland by gift. Turbo tax 2010 2011 Transfer of farm property at death (except for income in respect of a decedent). Turbo tax 2010 2011 For more information, see Regulations section 1. Turbo tax 2010 2011 1252-2. Turbo tax 2010 2011 Amount to report as ordinary income. Turbo tax 2010 2011   You report as ordinary income the lesser of the following amounts. Turbo tax 2010 2011 Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Turbo tax 2010 2011 The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Turbo tax 2010 2011 Applicable percentage. Turbo tax 2010 2011   The applicable percentage is based on the length of time you held the land. Turbo tax 2010 2011 If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Turbo tax 2010 2011 If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Turbo tax 2010 2011 If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Turbo tax 2010 2011 Example. Turbo tax 2010 2011 You acquired farmland on January 19, 2005. Turbo tax 2010 2011 On October 3, 2013, you sold the land at a $30,000 gain. Turbo tax 2010 2011 Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Turbo tax 2010 2011 The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Turbo tax 2010 2011 You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Turbo tax 2010 2011 Section 1255 property. Turbo tax 2010 2011   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Turbo tax 2010 2011 If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Turbo tax 2010 2011 Amount to report as ordinary income. Turbo tax 2010 2011   You report as ordinary income the lesser of the following amounts. Turbo tax 2010 2011 The applicable percentage of the total excluded cost-sharing payments. Turbo tax 2010 2011 The gain on the disposition of the property. Turbo tax 2010 2011 You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Turbo tax 2010 2011 However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Turbo tax 2010 2011 Applicable percentage. Turbo tax 2010 2011   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Turbo tax 2010 2011 If the property is held less than 10 years after you receive the payments, the percentage is 100%. Turbo tax 2010 2011 After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Turbo tax 2010 2011 Form 4797, Part III. Turbo tax 2010 2011   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. Turbo tax 2010 2011 Prev  Up  Next   Home   More Online Publications