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Turbotax free 7. Turbotax free   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Turbotax free Custodian account for your child. Turbotax free Penalty for failure to supply SSN. Turbotax free Reporting backup withholding. Turbotax free Savings account with parent as trustee. Turbotax free Interest not reported on Form 1099-INT. Turbotax free Nominees. Turbotax free Incorrect amount. Turbotax free Information reporting requirement. Turbotax free Taxable InterestInterest subject to penalty for early withdrawal. Turbotax free Money borrowed to invest in certificate of deposit. Turbotax free U. Turbotax free S. Turbotax free Savings Bonds Education Savings Bond Program U. Turbotax free S. Turbotax free Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Turbotax free How To Report Interest IncomeSchedule B (Form 1040A or 1040). Turbotax free Reporting tax-exempt interest. Turbotax free U. Turbotax free S. Turbotax free savings bond interest previously reported. Turbotax free Reminder Foreign-source income. Turbotax free  If you are a U. Turbotax free S. Turbotax free citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Turbotax free S. Turbotax free law. Turbotax free This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Turbotax free Introduction This chapter discusses the following topics. Turbotax free Different types of interest income. Turbotax free What interest is taxable and what interest is nontaxable. Turbotax free When to report interest income. Turbotax free How to report interest income on your tax return. Turbotax free In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Turbotax free Exceptions to this rule are discussed later in this chapter. Turbotax free You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Turbotax free See Money borrowed to invest in certificate of deposit , later, and chapter 28. Turbotax free Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Turbotax free S. Turbotax free Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Turbotax free S. Turbotax free Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Turbotax free Recordkeeping. Turbotax free You should keep a list showing sources and interest amounts received during the year. Turbotax free Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Turbotax free Tax on unearned income of certain children. Turbotax free    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Turbotax free If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Turbotax free If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Turbotax free   Some parents can choose to include the child's interest and dividends on the parent's return. Turbotax free If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Turbotax free   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Turbotax free Beneficiary of an estate or trust. Turbotax free   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Turbotax free You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Turbotax free , from the fiduciary. Turbotax free Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Turbotax free Social security number (SSN). Turbotax free   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Turbotax free This includes payers of interest. Turbotax free If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Turbotax free SSN for joint account. Turbotax free   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Turbotax free (For information on who owns the funds in a joint account, see Joint accounts , later. Turbotax free ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Turbotax free This is because only one name and SSN can be shown on Form 1099. Turbotax free   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Turbotax free For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Turbotax free Custodian account for your child. Turbotax free   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Turbotax free For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Turbotax free Penalty for failure to supply SSN. Turbotax free   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Turbotax free See Failure to supply SSN under Penalties in chapter 1. Turbotax free Backup withholding also may apply. Turbotax free Backup withholding. Turbotax free   Your interest income is generally not subject to regular withholding. Turbotax free However, it may be subject to backup withholding to ensure that income tax is collected on the income. Turbotax free Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Turbotax free   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Turbotax free For more information, see Backup Withholding in chapter 4. Turbotax free Reporting backup withholding. Turbotax free   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Turbotax free The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Turbotax free ” Joint accounts. Turbotax free   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Turbotax free Income from property given to a child. Turbotax free   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Turbotax free   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Turbotax free Savings account with parent as trustee. Turbotax free   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Turbotax free The savings account legally belongs to the child. Turbotax free The parents are not legally permitted to use any of the funds to support the child. Turbotax free Form 1099-INT. Turbotax free   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Turbotax free This form shows you the interest you received during the year. Turbotax free Keep this form for your records. Turbotax free You do not have to attach it to your tax return. Turbotax free   Report on your tax return the total interest income you receive for the tax year. Turbotax free Interest not reported on Form 1099-INT. Turbotax free   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Turbotax free For example, you may receive distributive shares of interest from partnerships or S corporations. Turbotax free This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Turbotax free , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Turbotax free Nominees. Turbotax free   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Turbotax free   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Turbotax free Incorrect amount. Turbotax free   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Turbotax free The new Form 1099-INT you receive will be marked “Corrected. Turbotax free ” Form 1099-OID. Turbotax free   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Turbotax free For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Turbotax free Exempt-interest dividends. Turbotax free   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Turbotax free (However, see Information reporting requirement , next. Turbotax free ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Turbotax free You do not reduce your basis for distributions that are exempt-interest dividends. Turbotax free Information reporting requirement. Turbotax free   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Turbotax free This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Turbotax free Note. Turbotax free Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Turbotax free See Alternative Minimum Tax (AMT) in chapter 30 for more information. Turbotax free Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Turbotax free Interest on VA dividends. Turbotax free   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Turbotax free This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Turbotax free Individual retirement arrangements (IRAs). Turbotax free   Interest on a Roth IRA generally is not taxable. Turbotax free Interest on a traditional IRA is tax deferred. Turbotax free You generally do not include it in your income until you make withdrawals from the IRA. Turbotax free See chapter 17. Turbotax free Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Turbotax free The following are some sources of taxable interest. Turbotax free Dividends that are actually interest. Turbotax free   Certain distributions commonly called dividends are actually interest. Turbotax free You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Turbotax free  The “dividends” will be shown as interest income on Form 1099-INT. Turbotax free Money market funds. Turbotax free   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Turbotax free Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Turbotax free Certificates of deposit and other deferred interest accounts. Turbotax free   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Turbotax free You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Turbotax free The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Turbotax free If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Turbotax free Interest subject to penalty for early withdrawal. Turbotax free   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Turbotax free You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Turbotax free See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Turbotax free Money borrowed to invest in certificate of deposit. Turbotax free   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Turbotax free You must report the total interest you earn on the certificate in your income. Turbotax free If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Turbotax free See Interest Expenses in chapter 3 of Publication 550. Turbotax free Example. Turbotax free You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Turbotax free The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Turbotax free The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Turbotax free The bank also gives you a statement showing that you paid $310 interest for 2013. Turbotax free You must include the $575 in your income. Turbotax free If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Turbotax free Gift for opening account. Turbotax free   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Turbotax free   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Turbotax free For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Turbotax free The value is determined by the cost to the financial institution. Turbotax free Example. Turbotax free You open a savings account at your local bank and deposit $800. Turbotax free The account earns $20 interest. Turbotax free You also receive a $15 calculator. Turbotax free If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Turbotax free You must report $35 interest income on your tax return. Turbotax free Interest on insurance dividends. Turbotax free   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Turbotax free However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Turbotax free Prepaid insurance premiums. Turbotax free   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Turbotax free U. Turbotax free S. Turbotax free obligations. Turbotax free   Interest on U. Turbotax free S. Turbotax free obligations, such as U. Turbotax free S. Turbotax free Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Turbotax free Interest on tax refunds. Turbotax free   Interest you receive on tax refunds is taxable income. Turbotax free Interest on condemnation award. Turbotax free   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Turbotax free Installment sale payments. Turbotax free   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Turbotax free That interest is taxable when you receive it. Turbotax free If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Turbotax free See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Turbotax free Interest on annuity contract. Turbotax free   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Turbotax free Usurious interest. Turbotax free   Usurious interest is interest charged at an illegal rate. Turbotax free This is taxable as interest unless state law automatically changes it to a payment on the principal. Turbotax free Interest income on frozen deposits. Turbotax free   Exclude from your gross income interest on frozen deposits. Turbotax free A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Turbotax free   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Turbotax free If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Turbotax free   The interest you exclude is treated as credited to your account in the following year. Turbotax free You must include it in income in the year you can withdraw it. Turbotax free Example. Turbotax free $100 of interest was credited on your frozen deposit during the year. Turbotax free You withdrew $80 but could not withdraw any more as of the end of the year. Turbotax free You must include $80 in your income and exclude $20 from your income for the year. Turbotax free You must include the $20 in your income for the year you can withdraw it. Turbotax free Bonds traded flat. Turbotax free   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Turbotax free The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Turbotax free When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Turbotax free Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Turbotax free See Bonds Sold Between Interest Dates , later, for more information. Turbotax free Below-market loans. Turbotax free   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Turbotax free See Below-Market Loans in chapter 1 of Publication 550 for more information. Turbotax free U. Turbotax free S. Turbotax free Savings Bonds This section provides tax information on U. Turbotax free S. Turbotax free savings bonds. Turbotax free It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Turbotax free For other information on U. Turbotax free S. Turbotax free savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Turbotax free O. Turbotax free Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Turbotax free O. Turbotax free Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Turbotax free O. Turbotax free Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Turbotax free treasurydirect. Turbotax free gov/indiv/indiv. Turbotax free htm. Turbotax free Accrual method taxpayers. Turbotax free   If you use an accrual method of accounting, you must report interest on U. Turbotax free S. Turbotax free savings bonds each year as it accrues. Turbotax free You cannot postpone reporting interest until you receive it or until the bonds mature. Turbotax free Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Turbotax free Cash method taxpayers. Turbotax free   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Turbotax free S. Turbotax free savings bonds when you receive it. Turbotax free The cash method of accounting is explained in chapter 1 under Accounting Methods. Turbotax free But see Reporting options for cash method taxpayers , later. Turbotax free Series HH bonds. Turbotax free    These bonds were issued at face value. Turbotax free Interest is paid twice a year by direct deposit to your bank account. Turbotax free If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Turbotax free   Series HH bonds were first offered in 1980 and last offered in August 2004. Turbotax free Before 1980, series H bonds were issued. Turbotax free Series H bonds are treated the same as series HH bonds. Turbotax free If you are a cash method taxpayer, you must report the interest when you receive it. Turbotax free   Series H bonds have a maturity period of 30 years. Turbotax free Series HH bonds mature in 20 years. Turbotax free The last series H bonds matured in 2009. Turbotax free Series EE and series I bonds. Turbotax free   Interest on these bonds is payable when you redeem the bonds. Turbotax free The difference between the purchase price and the redemption value is taxable interest. Turbotax free Series EE bonds. Turbotax free   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Turbotax free   Before July 1980, series E bonds were issued. Turbotax free The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Turbotax free Paper series EE and series E bonds are issued at a discount. Turbotax free The face value is payable to you at maturity. Turbotax free Electronic series EE bonds are issued at their face value. Turbotax free The face value plus accrued interest is payable to you at maturity. Turbotax free As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Turbotax free   Owners of paper series EE bonds can convert them to electronic bonds. Turbotax free These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Turbotax free Series I bonds. Turbotax free   Series I bonds were first offered in 1998. Turbotax free These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Turbotax free The face value plus all accrued interest is payable to you at maturity. Turbotax free Reporting options for cash method taxpayers. Turbotax free   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Turbotax free Method 1. Turbotax free Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Turbotax free (However, see Savings bonds traded , later. Turbotax free )  Note. Turbotax free Series EE bonds issued in 1983 matured in 2013. Turbotax free If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Turbotax free The last series E bonds were issued in 1980 and matured in 2010. Turbotax free If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Turbotax free Method 2. Turbotax free Choose to report the increase in redemption value as interest each year. Turbotax free You must use the same method for all series EE, series E, and series I bonds you own. Turbotax free If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Turbotax free    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Turbotax free To learn how, see Education Savings Bond Program, later. Turbotax free Change from method 1. Turbotax free   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Turbotax free In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Turbotax free   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Turbotax free Change from method 2. Turbotax free   To change from method 2 to method 1, you must request permission from the IRS. Turbotax free Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Turbotax free You have typed or printed the following number at the top: “131. Turbotax free ” It includes your name and social security number under “131. Turbotax free ” It includes the year of change (both the beginning and ending dates). Turbotax free It identifies the savings bonds for which you are requesting this change. Turbotax free It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Turbotax free   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Turbotax free   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Turbotax free On the statement, type or print “Filed pursuant to section 301. Turbotax free 9100-2. Turbotax free ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Turbotax free    By the date you file the original statement with your return, you must also send a signed copy to the address below. Turbotax free   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Turbotax free O. Turbotax free Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Turbotax free   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Turbotax free In that case, follow the form instructions for an automatic change. Turbotax free No user fee is required. Turbotax free Co-owners. Turbotax free   If a U. Turbotax free S. Turbotax free savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Turbotax free One co-owner's funds used. Turbotax free    If you used your funds to buy the bond, you must pay the tax on the interest. Turbotax free This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Turbotax free Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Turbotax free The co-owner who redeemed the bond is a “nominee. Turbotax free ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Turbotax free Both co-owners' funds used. Turbotax free   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Turbotax free Community property. Turbotax free   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Turbotax free If you file separate returns, each of you generally must report one-half of the bond interest. Turbotax free For more information about community property, see Publication 555. Turbotax free Table 7-1. Turbotax free   These rules are also shown in Table 7-1. Turbotax free Ownership transferred. Turbotax free   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Turbotax free But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Turbotax free   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Turbotax free Purchased jointly. Turbotax free   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Turbotax free The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Turbotax free This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Turbotax free   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Turbotax free But the new co-owner will report only his or her share of the interest earned after the transfer. Turbotax free   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Turbotax free    Table 7-1. Turbotax free Who Pays the Tax on U. Turbotax free S. Turbotax free Savings Bond Interest IF . Turbotax free . Turbotax free . Turbotax free THEN the interest must be reported by . Turbotax free . Turbotax free . Turbotax free you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Turbotax free you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Turbotax free you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Turbotax free you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Turbotax free If you file separate returns, both you and your spouse generally report one-half of the interest. Turbotax free Example 1. Turbotax free You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Turbotax free The bond was issued to you and your spouse as co-owners. Turbotax free You both postpone reporting interest on the bond. Turbotax free You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Turbotax free At that time neither you nor your spouse has to report the interest earned to the date of reissue. Turbotax free Example 2. Turbotax free You bought a $1,000 series EE savings bond entirely with your own funds. Turbotax free The bond was issued to you and your spouse as co-owners. Turbotax free You both postpone reporting interest on the bond. Turbotax free You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Turbotax free You must report half the interest earned to the date of reissue. Turbotax free Transfer to a trust. Turbotax free   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Turbotax free However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Turbotax free You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Turbotax free   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Turbotax free See Savings bonds traded , later. Turbotax free Decedents. Turbotax free   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Turbotax free This is explained in chapter 1 of Publication 550. Turbotax free Savings bonds traded. Turbotax free   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Turbotax free (You cannot trade series I bonds for series HH bonds. Turbotax free After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Turbotax free ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Turbotax free When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Turbotax free Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Turbotax free Example. Turbotax free You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Turbotax free You reported the $223 as taxable income on your tax return. Turbotax free At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Turbotax free You hold the series HH bonds until maturity, when you receive $2,500. Turbotax free You must report $300 as interest income in the year of maturity. Turbotax free This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Turbotax free (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Turbotax free ) Choice to report interest in year of trade. Turbotax free   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Turbotax free If you made this choice, it is treated as a change from method 1. Turbotax free See Change from method 1 under Series EE and series I bonds, earlier. Turbotax free Form 1099-INT for U. Turbotax free S. Turbotax free savings bonds interest. Turbotax free   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Turbotax free Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Turbotax free However, your Form 1099-INT may show more interest than you have to include on your income tax return. Turbotax free For example, this may happen if any of the following are true. Turbotax free You chose to report the increase in the redemption value of the bond each year. Turbotax free The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Turbotax free You received the bond from a decedent. Turbotax free The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Turbotax free Ownership of the bond was transferred. Turbotax free The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Turbotax free You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Turbotax free The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Turbotax free (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Turbotax free ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Turbotax free The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Turbotax free (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Turbotax free , for the year of distribution. Turbotax free )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Turbotax free Publication 550 includes examples showing how to report these amounts. Turbotax free    Interest on U. Turbotax free S. Turbotax free savings bonds is exempt from state and local taxes. Turbotax free The Form 1099-INT you receive will indicate the amount that is for U. Turbotax free S. Turbotax free savings bond interest in box 3. Turbotax free Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Turbotax free S. Turbotax free savings bonds during the year if you pay qualified higher educational expenses during the same year. Turbotax free This exclusion is known as the Education Savings Bond Program. Turbotax free You do not qualify for this exclusion if your filing status is married filing separately. Turbotax free Form 8815. Turbotax free   Use Form 8815 to figure your exclusion. Turbotax free Attach the form to your Form 1040 or Form 1040A. Turbotax free Qualified U. Turbotax free S. Turbotax free savings bonds. Turbotax free   A qualified U. Turbotax free S. Turbotax free savings bond is a series EE bond issued after 1989 or a series I bond. Turbotax free The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Turbotax free You must be at least 24 years old before the bond's issue date. Turbotax free For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Turbotax free    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Turbotax free Beneficiary. Turbotax free   You can designate any individual (including a child) as a beneficiary of the bond. Turbotax free Verification by IRS. Turbotax free   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Turbotax free Qualified expenses. Turbotax free   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Turbotax free   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Turbotax free   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Turbotax free Eligible educational institutions. Turbotax free   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Turbotax free S. Turbotax free Department of Education. Turbotax free Reduction for certain benefits. Turbotax free   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Turbotax free Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Turbotax free Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Turbotax free Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Turbotax free Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Turbotax free Any expense used in figuring the American Opportunity and lifetime learning credits. Turbotax free Amount excludable. Turbotax free   If the total proceeds (interest and principal) from the qualified U. Turbotax free S. Turbotax free savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Turbotax free If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Turbotax free   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Turbotax free The numerator of the fraction is the qualified higher educational expenses you paid during the year. Turbotax free The denominator of the fraction is the total proceeds you received during the year. Turbotax free Example. Turbotax free In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Turbotax free S. Turbotax free savings bond they bought in April 1997. Turbotax free They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Turbotax free In 2013, they paid $4,000 of their daughter's college tuition. Turbotax free They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Turbotax free They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Turbotax free They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Turbotax free Modified adjusted gross income limit. Turbotax free   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Turbotax free You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Turbotax free   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Turbotax free   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Turbotax free If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Turbotax free   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Turbotax free Recordkeeping. Turbotax free If you claim the interest exclusion, you must keep a written record of the qualified U. Turbotax free S. Turbotax free savings bonds you redeem. Turbotax free Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Turbotax free You can use Form 8818 to record this information. Turbotax free You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Turbotax free U. Turbotax free S. Turbotax free Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Turbotax free S. Turbotax free Government. Turbotax free Taxation of interest. Turbotax free   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Turbotax free You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Turbotax free   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Turbotax free Treasury bills. Turbotax free   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Turbotax free They are generally issued at a discount in the amount of $100 and multiples of $100. Turbotax free The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Turbotax free Generally, you report this interest income when the bill is paid at maturity. Turbotax free If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Turbotax free Treasury notes and bonds. Turbotax free   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Turbotax free Maturity periods for Treasury bonds are longer than 10 years. Turbotax free Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Turbotax free Generally, you report this interest for the year paid. Turbotax free For more information, see U. Turbotax free S. Turbotax free Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Turbotax free For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Turbotax free O. Turbotax free Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Turbotax free treasurydirect. Turbotax free gov/indiv/indiv. Turbotax free htm. Turbotax free For information on series EE, series I, and series HH savings bonds, see U. Turbotax free S. Turbotax free Savings Bonds , earlier. Turbotax free Treasury inflation-protected securities (TIPS). Turbotax free   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Turbotax free For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Turbotax free Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Turbotax free You must report that part of the sales price as interest income for the year of sale. Turbotax free If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Turbotax free When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Turbotax free See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Turbotax free Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Turbotax free But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Turbotax free For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Turbotax free Annuity. Turbotax free   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Turbotax free See chapter 10 for information on pension and annuity income from nonqualified plans. Turbotax free State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Turbotax free Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Turbotax free Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Turbotax free For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Turbotax free Information reporting requirement. Turbotax free   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Turbotax free This is an information reporting requirement only. Turbotax free It does not change tax-exempt interest to taxable interest. Turbotax free Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Turbotax free You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Turbotax free A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Turbotax free OID is the difference between the stated redemption price at maturity and the issue price. Turbotax free All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Turbotax free Zero coupon bonds are one example of these instruments. Turbotax free The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Turbotax free See Discount on Short-Term Obligations in chapter 1 of Publication 550. Turbotax free De minimis OID. Turbotax free   You can treat the discount as zero if it is less than one-fourth of 1% (. Turbotax free 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Turbotax free This small discount is known as “de minimis” OID. Turbotax free Example 1. Turbotax free You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Turbotax free One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Turbotax free Because the $20 discount is less than $25, the OID is treated as zero. Turbotax free (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Turbotax free ) Example 2. Turbotax free The facts are the same as in Example 1, except that the bond was issued at $950. Turbotax free The OID is $50. Turbotax free Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Turbotax free Debt instrument bought after original issue. Turbotax free   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Turbotax free If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Turbotax free See Market Discount Bonds in chapter 1 of Publication 550. Turbotax free Exceptions to reporting OID. Turbotax free   The OID rules discussed in this chapter do not apply to the following debt instruments. Turbotax free Tax-exempt obligations. Turbotax free (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Turbotax free U. Turbotax free S. Turbotax free savings bonds. Turbotax free Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Turbotax free Obligations issued by an individual before March 2, 1984. Turbotax free Loans between individuals if all the following are true. Turbotax free The lender is not in the business of lending money. Turbotax free The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Turbotax free Avoiding any federal tax is not one of the principal purposes of the loan. Turbotax free Form 1099-OID. Turbotax free   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Turbotax free Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Turbotax free It also will show, in box 2, the stated interest you must include in your income. Turbotax free A copy of Form 1099-OID will be sent to the IRS. Turbotax free Do not file your copy with your return. Turbotax free Keep it for your records. Turbotax free   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Turbotax free But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Turbotax free Form 1099-OID not received. Turbotax free   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Turbotax free gov that list total OID on certain debt instruments and have information that will help you figure OID. Turbotax free For the latest OID tables, go to www. Turbotax free irs. Turbotax free gov and enter “OID tables” in the Search box. Turbotax free If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Turbotax free Nominee. Turbotax free   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Turbotax free Refiguring OID shown on Form 1099-OID. Turbotax free   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Turbotax free You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Turbotax free The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Turbotax free For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Turbotax free Refiguring periodic interest shown on Form 1099-OID. Turbotax free   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Turbotax free Certificates of deposit (CDs). Turbotax free   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Turbotax free   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Turbotax free , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Turbotax free Bearer CDs. Turbotax free   CDs issued after 1982 generally must be in registered form. Turbotax free Bearer CDs are CDs not in registered form. Turbotax free They are not issued in the depositor's name and are transferable from one individual to another. Turbotax free   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Turbotax free More information. Turbotax free   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Turbotax free When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Turbotax free Cash method. Turbotax free   Most individual taxpayers use the cash method. Turbotax free If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Turbotax free However, there are special rules for reporting the discount on certain debt instruments. Turbotax free See U. Turbotax free S. Turbotax free Savings Bonds and Original Issue Discount (OID) , earlier. Turbotax free Example. Turbotax free On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Turbotax free You are not in the business of lending money. Turbotax free The note stated that principal and interest would be due on August 31, 2013. Turbotax free In 2013, you received $2,508. Turbotax free 80 ($2,000 principal and $508. Turbotax free 80 interest). Turbotax free If you use the cash method, you must include in income on your 2013 return the $508. Turbotax free 80 interest you received in that year. Turbotax free Constructive receipt. Turbotax free   You constructively receive income when it is credited to your account or made available to you. Turbotax free You do not need to have physical possession of it. Turbotax free For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Turbotax free This is true even if they are not yet entered in your passbook. Turbotax free   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Turbotax free Accrual method. Turbotax free   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Turbotax free Interest is earned over the term of the debt instrument. Turbotax free Example. Turbotax free If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Turbotax free You would report the interest as follows: 2011, $80; 2012, $249. Turbotax free 60; and 2013, $179. Turbotax free 20. Turbotax free Coupon bonds. Turbotax free   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Turbotax free It does not matter when you mail the coupon for payment. Turbotax free How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Turbotax free You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Turbotax free Instead, you must use Form 1040A or Form 1040. Turbotax free Form 1040A. Turbotax free   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Turbotax free Your taxable interest income is more than $1,500. Turbotax free You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Turbotax free You received interest from a seller-financed mortgage, and the buyer used the property as a home. Turbotax free You received a Form 1099-INT for U. Turbotax free S. Turbotax free savings bond interest that includes amounts you reported before 2013. Turbotax free You received, as a nominee, interest that actually belongs to someone else. Turbotax free You received a Form 1099-INT for interest on frozen deposits. Turbotax free You are reporting OID in an amount less than the amount shown on Form 1099-OID. Turbotax free You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Turbotax free You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Turbotax free List each payer's name and the amount of interest income received from each payer on line 1. Turbotax free If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Turbotax free   You cannot use Form 1040A if you must use Form 1040, as described next. Turbotax free Form 1040. Turbotax free   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Turbotax free Schedule B (Form 1040A or 1040). Turbotax free   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Turbotax free Your taxable interest income is more than $1,500. Turbotax free You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Turbotax free You received interest from a seller-financed mortgage, and the buyer used the property as a home. Turbotax free You received a Form 1099-INT for U. Turbotax free S. Turbotax free savings bond interest that includes amounts you reported before 2013. Turbotax free You received, as a nominee, interest that actually belongs to someone else. Turbotax free You received a Form 1099-INT for interest on frozen deposits. Turbotax free You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Turbotax free You are reporting OID in an amount less than the amount shown on Form 1099-OID. Turbotax free Statement (2) in the preceding list under Form 1040 is true. Turbotax free In Part I, line 1, list each payer's name and the amount received from each. Turbotax free If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Turbotax free Reporting tax-exempt interest. Turbotax free   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Turbotax free Add these amounts to any other tax-exempt interest you received. Turbotax free Report the total on line 8b of Form 1040A or 1040. Turbotax free   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Turbotax free Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Turbotax free   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Turbotax free These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Turbotax free Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Turbotax free    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Turbotax free Form 1099-INT. Turbotax free   Your taxable interest income, except for interest from U. Turbotax free S. Turbotax free savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Turbotax free Add this amount to any other taxable interest income you received. Turbotax free You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Turbotax free Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Turbotax free Your identifying number may be truncated on any paper Form 1099-INT you receive. Turbotax free   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Turbotax free See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Turbotax free   Box 3 of Form 1099-INT shows the interest income you received from U. Turbotax free S. Turbotax free savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Turbotax free Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Turbotax free If part of the amount shown in box 3 was previously included in your interest income, see U. Turbotax free S. Turbotax free savings bond interest previously reported , later. Turbotax free   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Turbotax free Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Turbotax free   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Turbotax free See chapter 28 for more information about investment expenses. Turbotax free   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Turbotax free You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Turbotax free To take the credit, you may have to file Form 1116, Foreign Tax Credit. Turbotax free For more information, see Publication 514, Foreign Tax Credit for Individuals. Turbotax free U. Turbotax free S. Turbotax free savings bond interest previously reported. Turbotax free   If you received a Form 1099-INT for U. Turbotax free S. Turbotax free savings bond interest, the form may show interest you do not have to report. Turbotax free See Form 1099-INT for U. Turbotax free S. Turbotax free savings bonds interest , earlier, under U. Turbotax free S. Turbotax free Savings Bonds. Turbotax free   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Turbotax free Then follow these steps. Turbotax free Several lines above line 2, enter a subtotal of all interest listed on line 1. Turbotax free Below the subtotal enter “U. Turbotax free S. Turbotax free Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Turbotax free Subtract these amounts from the subtotal and enter the result on line 2. Turbotax free More information. Turbotax free   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. 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The Turbotax Free

Turbotax free Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. Turbotax free Proc. Turbotax free 2009-37 Table of Contents SECTION 1. Turbotax free PURPOSE SECTION 2. Turbotax free BACKGROUND SECTION 3. Turbotax free SCOPE SECTION 4. Turbotax free ELECTION PROCEDURES SECTION 5. Turbotax free REQUIRED INFORMATION STATEMENT SECTION 6. Turbotax free EFFECTIVE DATE SECTION 7. Turbotax free TRANSITION RULE SECTION 8. Turbotax free PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. Turbotax free PURPOSE . Turbotax free 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. Turbotax free . Turbotax free 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. Turbotax free This revenue procedure describes the time and manner of providing this additional information. Turbotax free . Turbotax free 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. Turbotax free Taxpayers should be aware that these regulations may be retroactive. Turbotax free See § 7805(b)(2). Turbotax free This revenue procedure may be modified to provide procedures consistent with additional guidance. Turbotax free SECTION 2. Turbotax free BACKGROUND . Turbotax free 01 Section 108(i), Generally. Turbotax free Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. Turbotax free L. Turbotax free No. Turbotax free 111-5, 123 Stat. Turbotax free 338. Turbotax free In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. Turbotax free Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). Turbotax free The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. Turbotax free 1273-1(d) of the Income Tax Regulations. Turbotax free The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. Turbotax free For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). Turbotax free A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). Turbotax free See § 108(i)(5)(D). Turbotax free The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. Turbotax free Section 108(i)(5)(D)(ii). Turbotax free For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. Turbotax free . Turbotax free 02 Applicable Debt Instrument. Turbotax free Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. Turbotax free The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). Turbotax free Section 108(i)(3)(B). Turbotax free For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. Turbotax free 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. Turbotax free 1502-13(g)(5). Turbotax free . Turbotax free 03 Reacquisition. Turbotax free Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). Turbotax free The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. Turbotax free See § 108(i)(4)(B). Turbotax free The term “acquisition” also includes an indirect acquisition within the meaning of § 1. Turbotax free 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). Turbotax free For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. Turbotax free . Turbotax free 04 General Requirements for the Section 108(i) Election. Turbotax free Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. Turbotax free (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. Turbotax free ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. Turbotax free Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. Turbotax free . Turbotax free 05 Section 108(i) Elections Made by Pass-through Entities. Turbotax free In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. Turbotax free Section 108(i)(5)(B)(iii). Turbotax free . Turbotax free 06 Additional Information on Subsequent Years’ Returns. Turbotax free Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. Turbotax free . Turbotax free 07 Exclusivity. Turbotax free Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). Turbotax free . Turbotax free 08 Allocation of Deferred COD Income on Partnership Indebtedness. Turbotax free Section 4. Turbotax free 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. Turbotax free If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Turbotax free 704-1(b)(2)(iii). Turbotax free Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). Turbotax free The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). Turbotax free The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). Turbotax free . Turbotax free 09 Partner’s Deferred § 752 Amount. Turbotax free A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). Turbotax free A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). Turbotax free To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. Turbotax free 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). Turbotax free See Rev. Turbotax free Rul. Turbotax free 92-97, 1992-2 C. Turbotax free B. Turbotax free 124, and Rev. Turbotax free Rul. Turbotax free 94-4, 1994-1 C. Turbotax free B. Turbotax free 195. Turbotax free A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). Turbotax free . Turbotax free 10 Allocation of Deferred COD Income on S Corporation Indebtedness. Turbotax free For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. Turbotax free . Turbotax free 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. Turbotax free (1) In general. Turbotax free The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). Turbotax free These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. Turbotax free OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). Turbotax free COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. Turbotax free See § 1. Turbotax free 56(g)-1(c)(1). Turbotax free (2) Exceptions for certain special status corporations. Turbotax free The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. Turbotax free OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. Turbotax free . Turbotax free 12 Extension of Time to Make Election. Turbotax free Under § 301. Turbotax free 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. Turbotax free An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. Turbotax free Section 301. Turbotax free 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. Turbotax free SECTION 3. Turbotax free SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). Turbotax free SECTION 4. Turbotax free ELECTION PROCEDURES . Turbotax free 01 In General. Turbotax free (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. Turbotax free 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. Turbotax free 07, 4. Turbotax free 08, 4. Turbotax free 09, or 4. Turbotax free 10 of this revenue procedure. Turbotax free (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. Turbotax free 01(1)(a) of this revenue procedure for making the § 108(i) election. Turbotax free The rules that apply to an automatic extension under § 301. Turbotax free 9100-2(a) apply to this automatic extension. Turbotax free . Turbotax free 02 Section 108(i) Elections Made by Members of Consolidated Groups. Turbotax free The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. Turbotax free See § 1. Turbotax free 1502-77(a). Turbotax free . Turbotax free 03 Aggregation Rule. Turbotax free A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. Turbotax free A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. Turbotax free 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. Turbotax free . Turbotax free 04 Partial Elections. Turbotax free (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. Turbotax free Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. Turbotax free The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. Turbotax free (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). Turbotax free Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. Turbotax free (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Turbotax free Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). Turbotax free A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. Turbotax free The provisions of this section 4. Turbotax free 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. Turbotax free . Turbotax free 05 Contents of Election Statement. Turbotax free A statement meets the requirements of this section 4. Turbotax free 05 if the statement— (1) Label. Turbotax free States “Section 108(i) Election” across the top. Turbotax free (2) Required information. Turbotax free Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. Turbotax free 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. Turbotax free . Turbotax free 06 Supplemental information. Turbotax free The statement described in section 4. Turbotax free 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. Turbotax free 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. Turbotax free 05(2)(d) of this revenue procedure. Turbotax free This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. Turbotax free If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. Turbotax free If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. Turbotax free In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. Turbotax free 08, 2. Turbotax free 10 and, if applicable, 4. Turbotax free 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. Turbotax free . Turbotax free 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. Turbotax free The rules of this section 4. Turbotax free 07 apply to partnerships other than partnerships described in section 4. Turbotax free 10 of this revenue procedure. Turbotax free (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). Turbotax free For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. Turbotax free , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Turbotax free Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). Turbotax free (2) Election information statement provided to partners. Turbotax free The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. Turbotax free 07(2). Turbotax free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Turbotax free A statement meets the requirements of this section 4. Turbotax free 07(2) if the statement— (a) Label. Turbotax free States “Section 108(i) Election Information Statement for Partners” across the top. Turbotax free (b) Required information. Turbotax free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. Turbotax free 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. Turbotax free 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. Turbotax free 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. Turbotax free (c) If a partner fails to provide the written statement required by section 4. Turbotax free 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. Turbotax free 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. Turbotax free (3) Partner reporting requirements. Turbotax free The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. Turbotax free 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. Turbotax free Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. Turbotax free A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. Turbotax free If a partner provides its written statement under this section 4. Turbotax free 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. Turbotax free 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. Turbotax free . Turbotax free 08 Additional Requirements for an S Corporation Making a § 108(i) Election. Turbotax free (1) Information filing on Schedule K-1 (Form 1120S). Turbotax free For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. Turbotax free , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Turbotax free S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. Turbotax free (2) Election information statement provided to shareholders. Turbotax free The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. Turbotax free 08(2). Turbotax free The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Turbotax free A statement meets the requirements of this section 4. Turbotax free 08(2) if the statement— (a) Label. Turbotax free States “Section 108(i) Election Information Statement for Shareholders” across the top. Turbotax free (b) Required information. Turbotax free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. Turbotax free 06 of this revenue procedure. Turbotax free . Turbotax free 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. Turbotax free The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. Turbotax free 964-1(c)(3). Turbotax free Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. Turbotax free 05 of this revenue procedure and, if applicable, section 4. Turbotax free 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. Turbotax free . Turbotax free 10 Section 108(i) Elections Made By Certain Foreign Partnerships. Turbotax free The rules of this section 4. Turbotax free 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). Turbotax free See § 1. Turbotax free 6031(a)-1(b). Turbotax free (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. Turbotax free 05 of this revenue procedure and, if applicable, section 4. Turbotax free 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. Turbotax free 6031(a)-1(b)(5) it files with the Service. Turbotax free In addition, a nonfiling foreign partnership must include in the information required in section 4. Turbotax free 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. Turbotax free S. Turbotax free persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). Turbotax free (2) The nonfiling foreign partnership must make the election, in accordance with § 1. Turbotax free 6031(a)-1(b)(5), by the date provided in section 4. Turbotax free 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. Turbotax free (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. Turbotax free 07(1) of this revenue procedure. Turbotax free Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Turbotax free The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. Turbotax free 07(2) of this revenue procedure by the date provided in section 4. Turbotax free 01(1)(a) of this revenue procedure. Turbotax free The partnership should not attach any statement described in section 4. Turbotax free 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. Turbotax free However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. Turbotax free (4) The partnership and each affected partner must satisfy the requirements of section 4. Turbotax free 07(3) of this revenue procedure. Turbotax free . Turbotax free 11 Protective § 108(i) Election. Turbotax free (1) In general. Turbotax free A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. Turbotax free If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). Turbotax free Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. Turbotax free A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. Turbotax free 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. Turbotax free 01(1)(a) of this revenue procedure. Turbotax free The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. Turbotax free A statement meets the requirements of this section 4. Turbotax free 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. Turbotax free 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. Turbotax free 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. Turbotax free 06 of this revenue procedure. Turbotax free (2) Statements provided to shareholders and partners. Turbotax free (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. Turbotax free 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. Turbotax free 11(1)(d) of this revenue procedure. Turbotax free (b) The partnership or S corporation should not attach the statements described in this section 4. Turbotax free 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Turbotax free . Turbotax free 12 Election-Year Reporting by Tiered Pass-Through Entities. Turbotax free (1) A partnership required to file a U. Turbotax free S. Turbotax free partnership return other than under § 1. Turbotax free 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. Turbotax free 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Turbotax free 07(1)(a) through (d) of this revenue procedure). Turbotax free (2) If a partnership described in section 4. Turbotax free 12(1) of this revenue procedure receives a statement described in sections 4. Turbotax free 07(2) or 4. Turbotax free 10(3) of this revenue procedure or this section 4. Turbotax free 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. Turbotax free 07(2)(b)(x) of this revenue procedure. Turbotax free If an S corporation receives a statement described in sections 4. Turbotax free 07(2) or 4. Turbotax free 10(3) of this revenue procedure or this section 4. Turbotax free 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. Turbotax free 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. Turbotax free The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Turbotax free The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Turbotax free (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Turbotax free 704-1(b)(2)(iii). Turbotax free The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Turbotax free No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. Turbotax free The partnership allocates amounts described in section 4. Turbotax free 06 of this revenue procedure under this section 4. Turbotax free 12(3) as if the additional COD income was realized. Turbotax free (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. Turbotax free No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. Turbotax free (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. Turbotax free (6) This paragraph 4. Turbotax free 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. Turbotax free S. Turbotax free Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. Turbotax free 07(1) of this revenue procedure, or a statement described in sections 4. Turbotax free 07(2) or 4. Turbotax free 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Turbotax free (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Turbotax free 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. Turbotax free 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Turbotax free (b) A Category 2 filer must include its share of the information described in section 4. Turbotax free 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Turbotax free Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Turbotax free (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. Turbotax free 12(6)(a)(ii) and 4. Turbotax free 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Turbotax free However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Turbotax free (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. Turbotax free 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. Turbotax free 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. Turbotax free 12(1) and (2) of this revenue procedure. Turbotax free Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Turbotax free 12(6) of this revenue procedure. Turbotax free (8) The provisions of section 4. Turbotax free 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. Turbotax free 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. Turbotax free 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. Turbotax free 11(1)(d) of this revenue procedure. Turbotax free SECTION 5. Turbotax free REQUIRED INFORMATION STATEMENT . Turbotax free 01 Annual Information Statements. Turbotax free Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. Turbotax free 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. Turbotax free 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. Turbotax free . Turbotax free 02 Contents of Statement. Turbotax free A statement meets the requirements of this section 5. Turbotax free 02 if the statement— (1) Label. Turbotax free States “Section 108(i) Information Statement” across the top; (2) Required information. Turbotax free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Turbotax free (3) Election attached. Turbotax free Includes a copy of the election statement described in section 4. Turbotax free 05 of this revenue procedure. Turbotax free . Turbotax free 03 Additional Annual Reporting Requirements for Certain Partnerships. Turbotax free The rules of this section 5. Turbotax free 03 apply to partnerships other than partnerships described in section 5. Turbotax free 05 of this revenue procedure. Turbotax free (1) In general. Turbotax free A partnership that makes an election under § 108(i) (except for a protective election under section 4. Turbotax free 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Turbotax free 01 of this revenue procedure. Turbotax free In addition, for each taxable year in which a statement is required under section 5. Turbotax free 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. Turbotax free 07(1) of this revenue procedure. Turbotax free (2) Annual information statements provided to partners. Turbotax free The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. Turbotax free 01 of this revenue procedure, a statement meeting the requirements of this section 5. Turbotax free 03(2). Turbotax free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Turbotax free A statement meets the requirements of this section 5. Turbotax free 03(2) if the statement— (a) Label. Turbotax free States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. Turbotax free (b) Required information. Turbotax free Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. Turbotax free If a partner fails to provide the written statement required by section 4. Turbotax free 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. Turbotax free 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. Turbotax free . Turbotax free 04 Additional Annual Reporting Requirements for an S Corporation. Turbotax free (1) In general. Turbotax free An S corporation that makes an election under § 108(i) (except for a protective election under section 4. Turbotax free 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Turbotax free 01 of this revenue procedure. Turbotax free In addition, for each taxable year in which a statement is required under section 5. Turbotax free 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. Turbotax free 08(1) of this revenue procedure. Turbotax free (2) Annual information statements provided to shareholders. Turbotax free The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. Turbotax free 01 of this revenue procedure a statement meeting the requirements of this section 5. Turbotax free 04(2). Turbotax free The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Turbotax free A statement meets the requirements of this section 5. Turbotax free 04(2) if the statement— (a) Label. Turbotax free States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. Turbotax free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Turbotax free . Turbotax free 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. Turbotax free (1) The rules of this section 5. Turbotax free 05 apply to nonfiling foreign partnerships. Turbotax free (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. Turbotax free 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. Turbotax free 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. Turbotax free 01 of this revenue procedure. Turbotax free (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. Turbotax free 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. Turbotax free (4) For each taxable year in which a statement is required under section 5. Turbotax free 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. Turbotax free 07(1) of this revenue procedure. Turbotax free Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Turbotax free The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. Turbotax free 6031(b)-1T(b). Turbotax free The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. Turbotax free 05(2) of this revenue procedure. Turbotax free (5) For each taxable year for which a statement is required under section 5. Turbotax free 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. Turbotax free 03(2) of this revenue procedure. Turbotax free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. Turbotax free . Turbotax free 06 Information Statements Made on Behalf of Certain Foreign Corporations. Turbotax free Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. Turbotax free 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. Turbotax free 01 of this revenue procedure. Turbotax free . Turbotax free 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. Turbotax free (1) A partnership required to file a U. Turbotax free S. Turbotax free partnership return other than under § 1. Turbotax free 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. Turbotax free 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Turbotax free 07(1)(a) through (d) of this revenue procedure). Turbotax free (2) If a partnership described in section 5. Turbotax free 07(1) of this revenue procedure receives a statement described in sections 5. Turbotax free 03(2) or 5. Turbotax free 05(5) of this revenue procedure or this section 5. Turbotax free 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. Turbotax free If an S corporation receives a statement described in sections 5. Turbotax free 03(2) or 5. Turbotax free 05(5) of this revenue procedure or this section 5. Turbotax free 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. Turbotax free 03(2)(b)(i) through (viii) of this revenue procedure. Turbotax free The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Turbotax free The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Turbotax free (3) This paragraph 5. Turbotax free 07(3) provides the rules for persons described in section 4. Turbotax free 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. Turbotax free 03(1) of this revenue procedure, or a statement described in sections 5. Turbotax free 03(2) or 5. Turbotax free 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Turbotax free (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Turbotax free 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. Turbotax free 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Turbotax free (b) A Category 2 filer must include its share of the information described in section 4. Turbotax free 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Turbotax free Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Turbotax free (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. Turbotax free 07(3)(a)(ii) and 5. Turbotax free 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Turbotax free However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Turbotax free (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. Turbotax free 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. Turbotax free 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. Turbotax free 07(1) and (2) of this revenue procedure. Turbotax free Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Turbotax free 12(6) of this revenue procedure. Turbotax free SECTION 6. Turbotax free EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. Turbotax free SECTION 7. Turbotax free TRANSITION RULE . Turbotax free 01 Noncomplying Election. Turbotax free Except as otherwise provided in this section 7. Turbotax free 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. Turbotax free However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. Turbotax free . Turbotax free 02 Modification of Election. Turbotax free A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). Turbotax free To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. Turbotax free . Turbotax free 03 Notations. Turbotax free A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. Turbotax free A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. Turbotax free See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. Turbotax free SECTION 8. Turbotax free PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. Turbotax free S. Turbotax free C. Turbotax free 3507) under control number 1545-2147. Turbotax free An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Turbotax free The collection of information in this revenue procedure is in sections 4, 5 and 7. Turbotax free This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. Turbotax free This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. Turbotax free The collection of information is required to obtain a benefit. Turbotax free The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. Turbotax free The estimated total annual reporting burden is 300,000 hours. Turbotax free The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. Turbotax free The estimated number of respondents is 50,000. Turbotax free Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Turbotax free Generally, tax returns and return information are confidential, as required by § 6103. Turbotax free DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. Turbotax free Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). Turbotax free For further information regarding this revenue procedure, contact Megan A. Turbotax free Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. Turbotax free Blanchard at (202) 622-3950 for questions involving OID, Ronald M. Turbotax free Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). Turbotax free Prev  Up  Next   Home   More Internal Revenue Bulletins