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Vita Tax Locations 2012

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Vita Tax Locations 2012

Vita tax locations 2012 23. Vita tax locations 2012   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Vita tax locations 2012 Mortgage proceeds used for business or investment. Vita tax locations 2012 Introduction This chapter discusses what interest expenses you can deduct. Vita tax locations 2012 Interest is the amount you pay for the use of borrowed money. Vita tax locations 2012 The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Vita tax locations 2012 Home mortgage interest, including certain points and mortgage insurance premiums. Vita tax locations 2012 Investment interest. Vita tax locations 2012 This chapter explains these deductions. Vita tax locations 2012 It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Vita tax locations 2012 Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Vita tax locations 2012 Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Vita tax locations 2012 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Vita tax locations 2012 You can deduct home mortgage interest if all the following conditions are met. Vita tax locations 2012 You file Form 1040 and itemize deductions on Schedule A (Form 1040). Vita tax locations 2012 The mortgage is a secured debt on a qualified home in which you have an ownership interest. Vita tax locations 2012 (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Vita tax locations 2012 The term “qualified home” means your main home or second home. Vita tax locations 2012 For details, see Publication 936. Vita tax locations 2012 )  Both you and the lender must intend that the loan be repaid. Vita tax locations 2012 Amount Deductible In most cases, you can deduct all of your home mortgage interest. Vita tax locations 2012 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Vita tax locations 2012 Fully deductible interest. Vita tax locations 2012   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Vita tax locations 2012 (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Vita tax locations 2012 )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Vita tax locations 2012 Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Vita tax locations 2012 Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Vita tax locations 2012 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Vita tax locations 2012   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Vita tax locations 2012    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Vita tax locations 2012 Figure 23-A. Vita tax locations 2012 Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Vita tax locations 2012 Figure 23-A. Vita tax locations 2012 Is My Interest Fully Deductible? Limits on deduction. Vita tax locations 2012   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Vita tax locations 2012 If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Vita tax locations 2012 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Vita tax locations 2012 It also describes certain special situations that may affect your deduction. Vita tax locations 2012 Late payment charge on mortgage payment. Vita tax locations 2012   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Vita tax locations 2012 Mortgage prepayment penalty. Vita tax locations 2012   If you pay off your home mortgage early, you may have to pay a penalty. Vita tax locations 2012 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Vita tax locations 2012 Sale of home. Vita tax locations 2012   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Vita tax locations 2012 Example. Vita tax locations 2012 John and Peggy Harris sold their home on May 7. Vita tax locations 2012 Through April 30, they made home mortgage interest payments of $1,220. Vita tax locations 2012 The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Vita tax locations 2012 Their mortgage interest deduction is $1,270 ($1,220 + $50). Vita tax locations 2012 Prepaid interest. Vita tax locations 2012   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Vita tax locations 2012 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Vita tax locations 2012 However, there is an exception that applies to points, discussed later. Vita tax locations 2012 Mortgage interest credit. Vita tax locations 2012   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Vita tax locations 2012 Figure the credit on Form 8396, Mortgage Interest Credit. Vita tax locations 2012 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Vita tax locations 2012   For more information on the credit, see chapter 37. Vita tax locations 2012 Ministers' and military housing allowance. Vita tax locations 2012   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Vita tax locations 2012 Hardest Hit Fund and Emergency Homeowners' Loan Programs. Vita tax locations 2012   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Vita tax locations 2012 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Vita tax locations 2012 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Vita tax locations 2012 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Vita tax locations 2012 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Vita tax locations 2012 Mortgage assistance payments under section 235 of the National Housing Act. Vita tax locations 2012   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Vita tax locations 2012 You cannot deduct the interest that is paid for you. Vita tax locations 2012 No other effect on taxes. Vita tax locations 2012   Do not include these mortgage assistance payments in your income. Vita tax locations 2012 Also, do not use these payments to reduce other deductions, such as real estate taxes. Vita tax locations 2012 Divorced or separated individuals. Vita tax locations 2012   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Vita tax locations 2012 See the discussion of Payments for jointly-owned home in chapter 18. Vita tax locations 2012 Redeemable ground rents. Vita tax locations 2012   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Vita tax locations 2012   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Vita tax locations 2012 For more information, see Publication 936. Vita tax locations 2012 Nonredeemable ground rents. Vita tax locations 2012   Payments on a nonredeemable ground rent are not mortgage interest. Vita tax locations 2012 You can deduct them as rent if they are a business expense or if they are for rental property. Vita tax locations 2012 Reverse mortgages. Vita tax locations 2012   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Vita tax locations 2012 With a reverse mortgage, you retain title to your home. Vita tax locations 2012 Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Vita tax locations 2012 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Vita tax locations 2012 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Vita tax locations 2012 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Vita tax locations 2012 Rental payments. Vita tax locations 2012   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Vita tax locations 2012 This is true even if the settlement papers call them interest. Vita tax locations 2012 You cannot deduct these payments as home mortgage interest. Vita tax locations 2012 Mortgage proceeds invested in tax-exempt securities. Vita tax locations 2012   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Vita tax locations 2012 “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Vita tax locations 2012 Refunds of interest. Vita tax locations 2012   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Vita tax locations 2012 If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Vita tax locations 2012 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Vita tax locations 2012 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Vita tax locations 2012    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Vita tax locations 2012 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Vita tax locations 2012   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Vita tax locations 2012 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Vita tax locations 2012 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Vita tax locations 2012 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Vita tax locations 2012 See Points paid by the seller , later. Vita tax locations 2012 General Rule You generally cannot deduct the full amount of points in the year paid. Vita tax locations 2012 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Vita tax locations 2012 See Deduction Allowed Ratably , next. Vita tax locations 2012 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Vita tax locations 2012 Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Vita tax locations 2012 You use the cash method of accounting. Vita tax locations 2012 This means you report income in the year you receive it and deduct expenses in the year you pay them. Vita tax locations 2012 Most individuals use this method. Vita tax locations 2012 Your loan is secured by a home. Vita tax locations 2012 (The home does not need to be your main home. Vita tax locations 2012 ) Your loan period is not more than 30 years. Vita tax locations 2012 If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Vita tax locations 2012 Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Vita tax locations 2012 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Vita tax locations 2012 (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Vita tax locations 2012 ) Your loan is secured by your main home. Vita tax locations 2012 (Your main home is the one you ordinarily live in most of the time. Vita tax locations 2012 ) Paying points is an established business practice in the area where the loan was made. Vita tax locations 2012 The points paid were not more than the points generally charged in that area. Vita tax locations 2012 You use the cash method of accounting. Vita tax locations 2012 This means you report income in the year you receive it and deduct expenses in the year you pay them. Vita tax locations 2012 (If you want more information about this method, see Accounting Methods in chapter 1. Vita tax locations 2012 ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Vita tax locations 2012 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Vita tax locations 2012 The funds you provided are not required to have been applied to the points. Vita tax locations 2012 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Vita tax locations 2012 You cannot have borrowed these funds from your lender or mortgage broker. Vita tax locations 2012 You use your loan to buy or build your main home. Vita tax locations 2012 The points were computed as a percentage of the principal amount of the mortgage. Vita tax locations 2012 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Vita tax locations 2012 The points may be shown as paid from either your funds or the seller's. Vita tax locations 2012 Figure 23-B. Vita tax locations 2012 Are My Points Fully Deductible This Year? Please click here for the text description of the image. Vita tax locations 2012 Figure 23-B. Vita tax locations 2012 Are My Points Fully Deductible This Year? Note. Vita tax locations 2012 If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Vita tax locations 2012 Home improvement loan. Vita tax locations 2012   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Vita tax locations 2012 Second home. Vita tax locations 2012 You cannot fully deduct in the year paid points you pay on loans secured by your second home. Vita tax locations 2012 You can deduct these points only over the life of the loan. Vita tax locations 2012 Refinancing. Vita tax locations 2012   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Vita tax locations 2012 This is true even if the new mortgage is secured by your main home. Vita tax locations 2012   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Vita tax locations 2012 You can deduct the rest of the points over the life of the loan. Vita tax locations 2012 Example 1. Vita tax locations 2012 In 1998, Bill Fields got a mortgage to buy a home. Vita tax locations 2012 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Vita tax locations 2012 The mortgage is secured by his home. Vita tax locations 2012 To get the new loan, he had to pay three points ($3,000). Vita tax locations 2012 Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Vita tax locations 2012 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Vita tax locations 2012 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Vita tax locations 2012 Bill's first payment on the new loan was due July 1. Vita tax locations 2012 He made six payments on the loan in 2013 and is a cash basis taxpayer. Vita tax locations 2012 Bill used the funds from the new mortgage to repay his existing mortgage. Vita tax locations 2012 Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Vita tax locations 2012 He cannot deduct all of the points in 2013. Vita tax locations 2012 He can deduct two points ($2,000) ratably over the life of the loan. Vita tax locations 2012 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Vita tax locations 2012 The other point ($1,000) was a fee for services and is not deductible. Vita tax locations 2012 Example 2. Vita tax locations 2012 The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Vita tax locations 2012 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Vita tax locations 2012 His deduction is $500 ($2,000 × 25%). Vita tax locations 2012 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Vita tax locations 2012 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Vita tax locations 2012 The total amount Bill deducts in 2013 is $550 ($500 + $50). Vita tax locations 2012 Special Situations This section describes certain special situations that may affect your deduction of points. Vita tax locations 2012 Original issue discount. Vita tax locations 2012   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Vita tax locations 2012 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Vita tax locations 2012 Amounts charged for services. Vita tax locations 2012   Amounts charged by the lender for specific services connected to the loan are not interest. Vita tax locations 2012 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Vita tax locations 2012 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Vita tax locations 2012 Points paid by the seller. Vita tax locations 2012   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Vita tax locations 2012 Treatment by seller. Vita tax locations 2012   The seller cannot deduct these fees as interest. Vita tax locations 2012 But they are a selling expense that reduces the amount realized by the seller. Vita tax locations 2012 See chapter 15 for information on selling your home. Vita tax locations 2012 Treatment by buyer. Vita tax locations 2012    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Vita tax locations 2012 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Vita tax locations 2012 If any of those tests are not met, the buyer deducts the points over the life of the loan. Vita tax locations 2012   For information about basis, see chapter 13. Vita tax locations 2012 Funds provided are less than points. Vita tax locations 2012   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Vita tax locations 2012 In addition, you can deduct any points paid by the seller. Vita tax locations 2012 Example 1. Vita tax locations 2012 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Vita tax locations 2012 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Vita tax locations 2012 Of the $1,000 charged for points, you can deduct $750 in the year paid. Vita tax locations 2012 You spread the remaining $250 over the life of the mortgage. Vita tax locations 2012 Example 2. Vita tax locations 2012 The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Vita tax locations 2012 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Vita tax locations 2012 You spread the remaining $250 over the life of the mortgage. Vita tax locations 2012 You must reduce the basis of your home by the $1,000 paid by the seller. Vita tax locations 2012 Excess points. Vita tax locations 2012   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Vita tax locations 2012 You must spread any additional points over the life of the mortgage. Vita tax locations 2012 Mortgage ending early. Vita tax locations 2012   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Vita tax locations 2012 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Vita tax locations 2012 Instead, deduct the remaining balance over the term of the new loan. Vita tax locations 2012    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Vita tax locations 2012 Example. Vita tax locations 2012 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Vita tax locations 2012 He deducts $200 points per year. Vita tax locations 2012 Through 2012, Dan has deducted $2,200 of the points. Vita tax locations 2012 Dan prepaid his mortgage in full in 2013. Vita tax locations 2012 He can deduct the remaining $800 of points in 2013. Vita tax locations 2012 Limits on deduction. Vita tax locations 2012   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Vita tax locations 2012 See Publication 936 for details. Vita tax locations 2012 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Vita tax locations 2012 The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Vita tax locations 2012 Qualified mortgage insurance. Vita tax locations 2012   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Vita tax locations 2012   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Vita tax locations 2012 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Vita tax locations 2012 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Vita tax locations 2012 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Vita tax locations 2012 Special rules for prepaid mortgage insurance. Vita tax locations 2012   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Vita tax locations 2012 You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Vita tax locations 2012 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Vita tax locations 2012 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Vita tax locations 2012 See the Example below. Vita tax locations 2012 Example. Vita tax locations 2012 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Vita tax locations 2012 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Vita tax locations 2012 Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Vita tax locations 2012 Ryan's adjusted gross income (AGI) for 2012 is $76,000. Vita tax locations 2012 Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Vita tax locations 2012 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Vita tax locations 2012 In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Vita tax locations 2012 Limit on deduction. Vita tax locations 2012   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Vita tax locations 2012 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Vita tax locations 2012 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Vita tax locations 2012 Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Vita tax locations 2012 You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Vita tax locations 2012 A governmental unit is a person for purposes of furnishing the statement. Vita tax locations 2012 The statement for each year should be sent to you by January 31 of the following year. Vita tax locations 2012 A copy of this form will also be sent to the IRS. Vita tax locations 2012 The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Vita tax locations 2012 However, it should not show any interest that was paid for you by a government agency. Vita tax locations 2012 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Vita tax locations 2012 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Vita tax locations 2012 See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Vita tax locations 2012 Prepaid interest on Form 1098. Vita tax locations 2012   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Vita tax locations 2012 However, you cannot deduct the prepaid amount for January 2014 in 2013. Vita tax locations 2012 (See Prepaid interest , earlier. Vita tax locations 2012 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Vita tax locations 2012 You will include the interest for January 2014 with the other interest you pay for 2014. Vita tax locations 2012 See How To Report , later. Vita tax locations 2012 Refunded interest. Vita tax locations 2012   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Vita tax locations 2012 See Refunds of interest , earlier. Vita tax locations 2012 Mortgage insurance premiums. Vita tax locations 2012   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Vita tax locations 2012 See Mortgage Insurance Premiums, earlier. Vita tax locations 2012 Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Vita tax locations 2012 If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Vita tax locations 2012 You can deduct investment interest subject to the limit discussed later. Vita tax locations 2012 However, you cannot deduct interest you incurred to produce tax-exempt income. Vita tax locations 2012 Nor can you deduct interest expenses on straddles. Vita tax locations 2012 Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Vita tax locations 2012 Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Vita tax locations 2012 It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Vita tax locations 2012 Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Vita tax locations 2012 Partners, shareholders, and beneficiaries. Vita tax locations 2012   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Vita tax locations 2012 Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Vita tax locations 2012 Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Vita tax locations 2012 The allocation is not affected by the use of property that secures the debt. Vita tax locations 2012 Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Vita tax locations 2012 You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Vita tax locations 2012 The interest carried over is treated as investment interest paid or accrued in that next year. Vita tax locations 2012 You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Vita tax locations 2012 Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Vita tax locations 2012 Investment income. Vita tax locations 2012    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Vita tax locations 2012 Investment income does not include Alaska Permanent Fund dividends. Vita tax locations 2012 It also does not include qualified dividends or net capital gain unless you choose to include them. Vita tax locations 2012 Choosing to include qualified dividends. Vita tax locations 2012   Investment income generally does not include qualified dividends, discussed in chapter 8. Vita tax locations 2012 However, you can choose to include all or part of your qualified dividends in investment income. Vita tax locations 2012   You make this choice by completing Form 4952, line 4g, according to its instructions. Vita tax locations 2012   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Vita tax locations 2012 Choosing to include net capital gain. Vita tax locations 2012   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Vita tax locations 2012 However, you can choose to include all or part of your net capital gain in investment income. Vita tax locations 2012    You make this choice by completing Form 4952, line 4g, according to its instructions. Vita tax locations 2012   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Vita tax locations 2012    Before making either choice, consider the overall effect on your tax liability. Vita tax locations 2012 Compare your tax if you make one or both of these choices with your tax if you do not. Vita tax locations 2012 Investment income of child reported on parent's return. Vita tax locations 2012    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Vita tax locations 2012 If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Vita tax locations 2012 Child's qualified dividends. Vita tax locations 2012   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Vita tax locations 2012 However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Vita tax locations 2012   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Vita tax locations 2012 Child's Alaska Permanent Fund dividends. Vita tax locations 2012   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Vita tax locations 2012 To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Vita tax locations 2012 Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Vita tax locations 2012 Subtract the result from the amount on Form 8814, line 12. Vita tax locations 2012 Child's capital gain distributions. Vita tax locations 2012    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Vita tax locations 2012 However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Vita tax locations 2012   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Vita tax locations 2012 Investment expenses. Vita tax locations 2012   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Vita tax locations 2012 Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Vita tax locations 2012 Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Vita tax locations 2012 Losses from passive activities. Vita tax locations 2012   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Vita tax locations 2012 See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Vita tax locations 2012 Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Vita tax locations 2012 Exception to use of Form 4952. Vita tax locations 2012   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Vita tax locations 2012 Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Vita tax locations 2012 You do not have any other deductible investment expenses. Vita tax locations 2012 You have no carryover of investment interest expense from 2012. Vita tax locations 2012 If you meet all of these tests, you can deduct all of your investment interest. Vita tax locations 2012 More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Vita tax locations 2012 Items You Cannot Deduct Some interest payments are not deductible. Vita tax locations 2012 Certain expenses similar to interest also are not deductible. Vita tax locations 2012 Nondeductible expenses include the following items. Vita tax locations 2012 Personal interest (discussed later). Vita tax locations 2012 Service charges (however, see Other Expenses (Line 23) in chapter 28). Vita tax locations 2012 Annual fees for credit cards. Vita tax locations 2012 Loan fees. Vita tax locations 2012 Credit investigation fees. Vita tax locations 2012 Interest to purchase or carry tax-exempt securities. Vita tax locations 2012 Penalties. Vita tax locations 2012   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Vita tax locations 2012 Personal Interest Personal interest is not deductible. Vita tax locations 2012 Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Vita tax locations 2012 It includes the following items. Vita tax locations 2012 Interest on car loans (unless you use the car for business). Vita tax locations 2012 Interest on federal, state, or local income tax. Vita tax locations 2012 Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Vita tax locations 2012 Late payment charges by a public utility. Vita tax locations 2012 You may be able to deduct interest you pay on a qualified student loan. Vita tax locations 2012 For details, see Publication 970, Tax Benefits for Education. Vita tax locations 2012 Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Vita tax locations 2012 However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Vita tax locations 2012 You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Vita tax locations 2012 You do this by tracing disbursements of the debt proceeds to specific uses. Vita tax locations 2012 For details on how to do this, see chapter 4 of Publication 535. Vita tax locations 2012 How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Vita tax locations 2012 Where you deduct your interest expense generally depends on how you use the loan proceeds. Vita tax locations 2012 See Table 23-1 for a summary of where to deduct your interest expense. Vita tax locations 2012 Home mortgage interest and points. Vita tax locations 2012   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Vita tax locations 2012 If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Vita tax locations 2012 Attach a statement explaining the difference and print “See attached” next to line 10. Vita tax locations 2012    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Vita tax locations 2012 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Vita tax locations 2012 The seller must give you this number and you must give the seller your TIN. Vita tax locations 2012 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Vita tax locations 2012 Failure to meet any of these requirements may result in a $50 penalty for each failure. Vita tax locations 2012 The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Vita tax locations 2012 See Social Security Number (SSN) in chapter 1 for more information about TINs. Vita tax locations 2012    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Vita tax locations 2012   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Vita tax locations 2012 More than one borrower. Vita tax locations 2012   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Vita tax locations 2012 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Vita tax locations 2012 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Vita tax locations 2012 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Vita tax locations 2012   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Vita tax locations 2012 You should let each of the other borrowers know what his or her share is. Vita tax locations 2012 Mortgage proceeds used for business or investment. Vita tax locations 2012    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Vita tax locations 2012 It shows where to deduct the part of your excess interest that is for those activities. Vita tax locations 2012 Investment interest. Vita tax locations 2012    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Vita tax locations 2012 Amortization of bond premium. Vita tax locations 2012   There are various ways to treat the premium you pay to buy taxable bonds. Vita tax locations 2012 See Bond Premium Amortization in Publication 550. Vita tax locations 2012 Income-producing rental or royalty interest. Vita tax locations 2012   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Vita tax locations 2012 Example. Vita tax locations 2012 You rent out part of your home and borrow money to make repairs. Vita tax locations 2012 You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Vita tax locations 2012 Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Vita tax locations 2012 Table 23-1. Vita tax locations 2012 Where To Deduct Your Interest Expense IF you have . Vita tax locations 2012 . Vita tax locations 2012 . Vita tax locations 2012 THEN deduct it on . Vita tax locations 2012 . Vita tax locations 2012 . Vita tax locations 2012 AND for more information go to . Vita tax locations 2012 . Vita tax locations 2012 . Vita tax locations 2012 deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Vita tax locations 2012 deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Vita tax locations 2012 deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Vita tax locations 2012 deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Vita tax locations 2012 deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Vita tax locations 2012 deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Vita tax locations 2012 deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Vita tax locations 2012 deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Vita tax locations 2012 deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Vita tax locations 2012 personal interest not deductible. Vita tax locations 2012 Prev  Up  Next   Home   More Online Publications
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The Vita Tax Locations 2012

Vita tax locations 2012 Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. Vita tax locations 2012 Proc. Vita tax locations 2012 2009-37 Table of Contents SECTION 1. Vita tax locations 2012 PURPOSE SECTION 2. Vita tax locations 2012 BACKGROUND SECTION 3. Vita tax locations 2012 SCOPE SECTION 4. Vita tax locations 2012 ELECTION PROCEDURES SECTION 5. Vita tax locations 2012 REQUIRED INFORMATION STATEMENT SECTION 6. Vita tax locations 2012 EFFECTIVE DATE SECTION 7. Vita tax locations 2012 TRANSITION RULE SECTION 8. Vita tax locations 2012 PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. Vita tax locations 2012 PURPOSE . Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 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. Vita tax locations 2012 This revenue procedure describes the time and manner of providing this additional information. Vita tax locations 2012 . Vita tax locations 2012 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. Vita tax locations 2012 Taxpayers should be aware that these regulations may be retroactive. Vita tax locations 2012 See § 7805(b)(2). Vita tax locations 2012 This revenue procedure may be modified to provide procedures consistent with additional guidance. Vita tax locations 2012 SECTION 2. Vita tax locations 2012 BACKGROUND . Vita tax locations 2012 01 Section 108(i), Generally. Vita tax locations 2012 Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. Vita tax locations 2012 L. Vita tax locations 2012 No. Vita tax locations 2012 111-5, 123 Stat. Vita tax locations 2012 338. Vita tax locations 2012 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. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 1273-1(d) of the Income Tax Regulations. Vita tax locations 2012 The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. Vita tax locations 2012 For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). Vita tax locations 2012 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). Vita tax locations 2012 See § 108(i)(5)(D). Vita tax locations 2012 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. Vita tax locations 2012 Section 108(i)(5)(D)(ii). Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 02 Applicable Debt Instrument. Vita tax locations 2012 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. Vita tax locations 2012 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). Vita tax locations 2012 Section 108(i)(3)(B). Vita tax locations 2012 For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. Vita tax locations 2012 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. Vita tax locations 2012 1502-13(g)(5). Vita tax locations 2012 . Vita tax locations 2012 03 Reacquisition. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 See § 108(i)(4)(B). Vita tax locations 2012 The term “acquisition” also includes an indirect acquisition within the meaning of § 1. Vita tax locations 2012 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 04 General Requirements for the Section 108(i) Election. Vita tax locations 2012 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. Vita tax locations 2012 (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. Vita tax locations 2012 ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. Vita tax locations 2012 Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. Vita tax locations 2012 . Vita tax locations 2012 05 Section 108(i) Elections Made by Pass-through Entities. Vita tax locations 2012 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. Vita tax locations 2012 Section 108(i)(5)(B)(iii). Vita tax locations 2012 . Vita tax locations 2012 06 Additional Information on Subsequent Years’ Returns. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 07 Exclusivity. Vita tax locations 2012 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). Vita tax locations 2012 . Vita tax locations 2012 08 Allocation of Deferred COD Income on Partnership Indebtedness. Vita tax locations 2012 Section 4. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 704-1(b)(2)(iii). Vita tax locations 2012 Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). Vita tax locations 2012 The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). Vita tax locations 2012 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”). Vita tax locations 2012 . Vita tax locations 2012 09 Partner’s Deferred § 752 Amount. Vita tax locations 2012 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”). Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 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). Vita tax locations 2012 See Rev. Vita tax locations 2012 Rul. Vita tax locations 2012 92-97, 1992-2 C. Vita tax locations 2012 B. Vita tax locations 2012 124, and Rev. Vita tax locations 2012 Rul. Vita tax locations 2012 94-4, 1994-1 C. Vita tax locations 2012 B. Vita tax locations 2012 195. Vita tax locations 2012 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). Vita tax locations 2012 . Vita tax locations 2012 10 Allocation of Deferred COD Income on S Corporation Indebtedness. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. Vita tax locations 2012 (1) In general. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 See § 1. Vita tax locations 2012 56(g)-1(c)(1). Vita tax locations 2012 (2) Exceptions for certain special status corporations. Vita tax locations 2012 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. Vita tax locations 2012 OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. Vita tax locations 2012 . Vita tax locations 2012 12 Extension of Time to Make Election. Vita tax locations 2012 Under § 301. Vita tax locations 2012 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. Vita tax locations 2012 An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. Vita tax locations 2012 Section 301. Vita tax locations 2012 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. Vita tax locations 2012 SECTION 3. Vita tax locations 2012 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). Vita tax locations 2012 SECTION 4. Vita tax locations 2012 ELECTION PROCEDURES . Vita tax locations 2012 01 In General. Vita tax locations 2012 (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. Vita tax locations 2012 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. Vita tax locations 2012 07, 4. Vita tax locations 2012 08, 4. Vita tax locations 2012 09, or 4. Vita tax locations 2012 10 of this revenue procedure. Vita tax locations 2012 (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. Vita tax locations 2012 01(1)(a) of this revenue procedure for making the § 108(i) election. Vita tax locations 2012 The rules that apply to an automatic extension under § 301. Vita tax locations 2012 9100-2(a) apply to this automatic extension. Vita tax locations 2012 . Vita tax locations 2012 02 Section 108(i) Elections Made by Members of Consolidated Groups. Vita tax locations 2012 The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. Vita tax locations 2012 See § 1. Vita tax locations 2012 1502-77(a). Vita tax locations 2012 . Vita tax locations 2012 03 Aggregation Rule. Vita tax locations 2012 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. Vita tax locations 2012 A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 04 Partial Elections. Vita tax locations 2012 (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. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 (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). Vita tax locations 2012 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. Vita tax locations 2012 (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. Vita tax locations 2012 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). Vita tax locations 2012 A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. Vita tax locations 2012 The provisions of this section 4. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 05 Contents of Election Statement. Vita tax locations 2012 A statement meets the requirements of this section 4. Vita tax locations 2012 05 if the statement— (1) Label. Vita tax locations 2012 States “Section 108(i) Election” across the top. Vita tax locations 2012 (2) Required information. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 06 Supplemental information. Vita tax locations 2012 The statement described in section 4. Vita tax locations 2012 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. Vita tax locations 2012 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. Vita tax locations 2012 05(2)(d) of this revenue procedure. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 08, 2. Vita tax locations 2012 10 and, if applicable, 4. Vita tax locations 2012 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. Vita tax locations 2012 . Vita tax locations 2012 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. Vita tax locations 2012 The rules of this section 4. Vita tax locations 2012 07 apply to partnerships other than partnerships described in section 4. Vita tax locations 2012 10 of this revenue procedure. Vita tax locations 2012 (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). Vita tax locations 2012 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. Vita tax locations 2012 , 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. Vita tax locations 2012 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). Vita tax locations 2012 (2) Election information statement provided to partners. Vita tax locations 2012 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. Vita tax locations 2012 07(2). Vita tax locations 2012 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. Vita tax locations 2012 A statement meets the requirements of this section 4. Vita tax locations 2012 07(2) if the statement— (a) Label. Vita tax locations 2012 States “Section 108(i) Election Information Statement for Partners” across the top. Vita tax locations 2012 (b) Required information. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. Vita tax locations 2012 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. Vita tax locations 2012 (c) If a partner fails to provide the written statement required by section 4. Vita tax locations 2012 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. Vita tax locations 2012 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. Vita tax locations 2012 (3) Partner reporting requirements. Vita tax locations 2012 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. Vita tax locations 2012 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 If a partner provides its written statement under this section 4. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 08 Additional Requirements for an S Corporation Making a § 108(i) Election. Vita tax locations 2012 (1) Information filing on Schedule K-1 (Form 1120S). Vita tax locations 2012 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. Vita tax locations 2012 , 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. Vita tax locations 2012 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. Vita tax locations 2012 (2) Election information statement provided to shareholders. Vita tax locations 2012 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. Vita tax locations 2012 08(2). Vita tax locations 2012 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. Vita tax locations 2012 A statement meets the requirements of this section 4. Vita tax locations 2012 08(2) if the statement— (a) Label. Vita tax locations 2012 States “Section 108(i) Election Information Statement for Shareholders” across the top. Vita tax locations 2012 (b) Required information. Vita tax locations 2012 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. Vita tax locations 2012 06 of this revenue procedure. Vita tax locations 2012 . Vita tax locations 2012 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. Vita tax locations 2012 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. Vita tax locations 2012 964-1(c)(3). Vita tax locations 2012 Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. Vita tax locations 2012 05 of this revenue procedure and, if applicable, section 4. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 10 Section 108(i) Elections Made By Certain Foreign Partnerships. Vita tax locations 2012 The rules of this section 4. Vita tax locations 2012 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”). Vita tax locations 2012 See § 1. Vita tax locations 2012 6031(a)-1(b). Vita tax locations 2012 (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. Vita tax locations 2012 05 of this revenue procedure and, if applicable, section 4. Vita tax locations 2012 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. Vita tax locations 2012 6031(a)-1(b)(5) it files with the Service. Vita tax locations 2012 In addition, a nonfiling foreign partnership must include in the information required in section 4. Vita tax locations 2012 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. Vita tax locations 2012 S. Vita tax locations 2012 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”). Vita tax locations 2012 (2) The nonfiling foreign partnership must make the election, in accordance with § 1. Vita tax locations 2012 6031(a)-1(b)(5), by the date provided in section 4. Vita tax locations 2012 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. Vita tax locations 2012 (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. Vita tax locations 2012 07(1) of this revenue procedure. Vita tax locations 2012 Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Vita tax locations 2012 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. Vita tax locations 2012 07(2) of this revenue procedure by the date provided in section 4. Vita tax locations 2012 01(1)(a) of this revenue procedure. Vita tax locations 2012 The partnership should not attach any statement described in section 4. Vita tax locations 2012 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. Vita tax locations 2012 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. Vita tax locations 2012 (4) The partnership and each affected partner must satisfy the requirements of section 4. Vita tax locations 2012 07(3) of this revenue procedure. Vita tax locations 2012 . Vita tax locations 2012 11 Protective § 108(i) Election. Vita tax locations 2012 (1) In general. Vita tax locations 2012 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. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. Vita tax locations 2012 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. Vita tax locations 2012 01(1)(a) of this revenue procedure. Vita tax locations 2012 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. Vita tax locations 2012 A statement meets the requirements of this section 4. Vita tax locations 2012 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. Vita tax locations 2012 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. Vita tax locations 2012 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. Vita tax locations 2012 06 of this revenue procedure. Vita tax locations 2012 (2) Statements provided to shareholders and partners. Vita tax locations 2012 (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. Vita tax locations 2012 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. Vita tax locations 2012 11(1)(d) of this revenue procedure. Vita tax locations 2012 (b) The partnership or S corporation should not attach the statements described in this section 4. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 12 Election-Year Reporting by Tiered Pass-Through Entities. Vita tax locations 2012 (1) A partnership required to file a U. Vita tax locations 2012 S. Vita tax locations 2012 partnership return other than under § 1. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 07(1)(a) through (d) of this revenue procedure). Vita tax locations 2012 (2) If a partnership described in section 4. Vita tax locations 2012 12(1) of this revenue procedure receives a statement described in sections 4. Vita tax locations 2012 07(2) or 4. Vita tax locations 2012 10(3) of this revenue procedure or this section 4. Vita tax locations 2012 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. Vita tax locations 2012 07(2)(b)(x) of this revenue procedure. Vita tax locations 2012 If an S corporation receives a statement described in sections 4. Vita tax locations 2012 07(2) or 4. Vita tax locations 2012 10(3) of this revenue procedure or this section 4. Vita tax locations 2012 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. Vita tax locations 2012 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 (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. Vita tax locations 2012 704-1(b)(2)(iii). Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 The partnership allocates amounts described in section 4. Vita tax locations 2012 06 of this revenue procedure under this section 4. Vita tax locations 2012 12(3) as if the additional COD income was realized. Vita tax locations 2012 (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. Vita tax locations 2012 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. Vita tax locations 2012 (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. Vita tax locations 2012 (6) This paragraph 4. Vita tax locations 2012 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. Vita tax locations 2012 S. Vita tax locations 2012 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. Vita tax locations 2012 07(1) of this revenue procedure, or a statement described in sections 4. Vita tax locations 2012 07(2) or 4. Vita tax locations 2012 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). Vita tax locations 2012 (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. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 (b) A Category 2 filer must include its share of the information described in section 4. Vita tax locations 2012 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Vita tax locations 2012 Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Vita tax locations 2012 (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. Vita tax locations 2012 12(6)(a)(ii) and 4. Vita tax locations 2012 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Vita tax locations 2012 However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Vita tax locations 2012 (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. Vita tax locations 2012 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. Vita tax locations 2012 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. Vita tax locations 2012 12(1) and (2) of this revenue procedure. Vita tax locations 2012 Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Vita tax locations 2012 12(6) of this revenue procedure. Vita tax locations 2012 (8) The provisions of section 4. Vita tax locations 2012 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. Vita tax locations 2012 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. Vita tax locations 2012 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. Vita tax locations 2012 11(1)(d) of this revenue procedure. Vita tax locations 2012 SECTION 5. Vita tax locations 2012 REQUIRED INFORMATION STATEMENT . Vita tax locations 2012 01 Annual Information Statements. Vita tax locations 2012 Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. Vita tax locations 2012 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 02 Contents of Statement. Vita tax locations 2012 A statement meets the requirements of this section 5. Vita tax locations 2012 02 if the statement— (1) Label. Vita tax locations 2012 States “Section 108(i) Information Statement” across the top; (2) Required information. Vita tax locations 2012 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. Vita tax locations 2012 (3) Election attached. Vita tax locations 2012 Includes a copy of the election statement described in section 4. Vita tax locations 2012 05 of this revenue procedure. Vita tax locations 2012 . Vita tax locations 2012 03 Additional Annual Reporting Requirements for Certain Partnerships. Vita tax locations 2012 The rules of this section 5. Vita tax locations 2012 03 apply to partnerships other than partnerships described in section 5. Vita tax locations 2012 05 of this revenue procedure. Vita tax locations 2012 (1) In general. Vita tax locations 2012 A partnership that makes an election under § 108(i) (except for a protective election under section 4. Vita tax locations 2012 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Vita tax locations 2012 01 of this revenue procedure. Vita tax locations 2012 In addition, for each taxable year in which a statement is required under section 5. Vita tax locations 2012 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. Vita tax locations 2012 07(1) of this revenue procedure. Vita tax locations 2012 (2) Annual information statements provided to partners. Vita tax locations 2012 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. Vita tax locations 2012 01 of this revenue procedure, a statement meeting the requirements of this section 5. Vita tax locations 2012 03(2). Vita tax locations 2012 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. Vita tax locations 2012 A statement meets the requirements of this section 5. Vita tax locations 2012 03(2) if the statement— (a) Label. Vita tax locations 2012 States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. Vita tax locations 2012 (b) Required information. Vita tax locations 2012 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. Vita tax locations 2012 If a partner fails to provide the written statement required by section 4. Vita tax locations 2012 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. Vita tax locations 2012 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. Vita tax locations 2012 . Vita tax locations 2012 04 Additional Annual Reporting Requirements for an S Corporation. Vita tax locations 2012 (1) In general. Vita tax locations 2012 An S corporation that makes an election under § 108(i) (except for a protective election under section 4. Vita tax locations 2012 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Vita tax locations 2012 01 of this revenue procedure. Vita tax locations 2012 In addition, for each taxable year in which a statement is required under section 5. Vita tax locations 2012 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. Vita tax locations 2012 08(1) of this revenue procedure. Vita tax locations 2012 (2) Annual information statements provided to shareholders. Vita tax locations 2012 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. Vita tax locations 2012 01 of this revenue procedure a statement meeting the requirements of this section 5. Vita tax locations 2012 04(2). Vita tax locations 2012 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. Vita tax locations 2012 A statement meets the requirements of this section 5. Vita tax locations 2012 04(2) if the statement— (a) Label. Vita tax locations 2012 States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. Vita tax locations 2012 (1) The rules of this section 5. Vita tax locations 2012 05 apply to nonfiling foreign partnerships. Vita tax locations 2012 (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. Vita tax locations 2012 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. Vita tax locations 2012 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. Vita tax locations 2012 01 of this revenue procedure. Vita tax locations 2012 (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. Vita tax locations 2012 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. Vita tax locations 2012 (4) For each taxable year in which a statement is required under section 5. Vita tax locations 2012 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. Vita tax locations 2012 07(1) of this revenue procedure. Vita tax locations 2012 Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Vita tax locations 2012 The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. Vita tax locations 2012 6031(b)-1T(b). Vita tax locations 2012 The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. Vita tax locations 2012 05(2) of this revenue procedure. Vita tax locations 2012 (5) For each taxable year for which a statement is required under section 5. Vita tax locations 2012 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. Vita tax locations 2012 03(2) of this revenue procedure. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 06 Information Statements Made on Behalf of Certain Foreign Corporations. Vita tax locations 2012 Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. Vita tax locations 2012 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. Vita tax locations 2012 01 of this revenue procedure. Vita tax locations 2012 . Vita tax locations 2012 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. Vita tax locations 2012 (1) A partnership required to file a U. Vita tax locations 2012 S. Vita tax locations 2012 partnership return other than under § 1. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 07(1)(a) through (d) of this revenue procedure). Vita tax locations 2012 (2) If a partnership described in section 5. Vita tax locations 2012 07(1) of this revenue procedure receives a statement described in sections 5. Vita tax locations 2012 03(2) or 5. Vita tax locations 2012 05(5) of this revenue procedure or this section 5. Vita tax locations 2012 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. Vita tax locations 2012 If an S corporation receives a statement described in sections 5. Vita tax locations 2012 03(2) or 5. Vita tax locations 2012 05(5) of this revenue procedure or this section 5. Vita tax locations 2012 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. Vita tax locations 2012 03(2)(b)(i) through (viii) of this revenue procedure. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 (3) This paragraph 5. Vita tax locations 2012 07(3) provides the rules for persons described in section 4. Vita tax locations 2012 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. Vita tax locations 2012 03(1) of this revenue procedure, or a statement described in sections 5. Vita tax locations 2012 03(2) or 5. Vita tax locations 2012 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). Vita tax locations 2012 (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. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 (b) A Category 2 filer must include its share of the information described in section 4. Vita tax locations 2012 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Vita tax locations 2012 Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Vita tax locations 2012 (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. Vita tax locations 2012 07(3)(a)(ii) and 5. Vita tax locations 2012 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Vita tax locations 2012 However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Vita tax locations 2012 (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. Vita tax locations 2012 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. Vita tax locations 2012 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. Vita tax locations 2012 07(1) and (2) of this revenue procedure. Vita tax locations 2012 Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Vita tax locations 2012 12(6) of this revenue procedure. Vita tax locations 2012 SECTION 6. Vita tax locations 2012 EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. Vita tax locations 2012 SECTION 7. Vita tax locations 2012 TRANSITION RULE . Vita tax locations 2012 01 Noncomplying Election. Vita tax locations 2012 Except as otherwise provided in this section 7. Vita tax locations 2012 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. Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 02 Modification of Election. Vita tax locations 2012 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). Vita tax locations 2012 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. Vita tax locations 2012 . Vita tax locations 2012 03 Notations. Vita tax locations 2012 A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. Vita tax locations 2012 A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. Vita tax locations 2012 See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. Vita tax locations 2012 SECTION 8. Vita tax locations 2012 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. Vita tax locations 2012 S. Vita tax locations 2012 C. Vita tax locations 2012 3507) under control number 1545-2147. Vita tax locations 2012 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. Vita tax locations 2012 The collection of information in this revenue procedure is in sections 4, 5 and 7. Vita tax locations 2012 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. Vita tax locations 2012 This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. Vita tax locations 2012 The collection of information is required to obtain a benefit. Vita tax locations 2012 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. Vita tax locations 2012 The estimated total annual reporting burden is 300,000 hours. Vita tax locations 2012 The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. Vita tax locations 2012 The estimated number of respondents is 50,000. Vita tax locations 2012 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. Vita tax locations 2012 Generally, tax returns and return information are confidential, as required by § 6103. Vita tax locations 2012 DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. Vita tax locations 2012 Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). Vita tax locations 2012 For further information regarding this revenue procedure, contact Megan A. Vita tax locations 2012 Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. Vita tax locations 2012 Blanchard at (202) 622-3950 for questions involving OID, Ronald M. Vita tax locations 2012 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). Vita tax locations 2012 Prev  Up  Next   Home   More Internal Revenue Bulletins