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Where Can I File My 2012 Taxes For Free

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Where Can I File My 2012 Taxes For Free

Where can i file my 2012 taxes for free Index A Activities not for profit, Hobby Expenses Adjustments to gross income Armed forces reservists' travel expenses, Armed Forces reservists traveling more than 100 miles from home. Where can i file my 2012 taxes for free Performing artists, Performing Artists State or local government officials paid on fee basis, Officials Paid on a Fee Basis Unlawful discrimination claims, Unlawful discrimination claims. Where can i file my 2012 taxes for free Administrative fees IRA trustees, Trustee's Administrative Fees for IRA Adoption expenses, Adoption Expenses Amortizable bond premium, Amortizable Premium on Taxable Bonds, More information. Where can i file my 2012 taxes for free Appraisal fees, Appraisal Fees Armed forces Military uniforms, Military uniforms. Where can i file my 2012 taxes for free Reservists, travel expenses, Armed Forces reservists traveling more than 100 miles from home. Where can i file my 2012 taxes for free Assistance (see Tax help) B Bad debts, Business Bad Debt Bank accounts Check-writing fees, Check-Writing Fees on Personal Account Losses on deposits, Loss on Deposits Bonds Amortizable premium, Amortizable Premium on Taxable Bonds Breach of contract Damages, Damages for Breach of Employment Contract Bribes, List of Nondeductible Expenses Burial expenses, List of Nondeductible Expenses Business expenses (see Employee business expenses) Business gifts, Gift expenses. Where can i file my 2012 taxes for free C Campaign contributions, Lobbying and political activities. Where can i file my 2012 taxes for free , Political Contributions Campaign expenses, Campaign Expenses Capital expenditures, Capital Expenses Casualty losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Cell phones, Depreciation on Computers Chambers of Commerce dues, Lobbying and political activities. 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Where can i file my 2012 taxes for free D Damages Breach of employment contract, Damages for Breach of Employment Contract Deposits Losses on, Loss on Deposits Depreciation Computers, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Disabilities, persons with Work-related expenses, Impairment-Related Work Expenses Dividends Fees to collect, Fees To Collect Interest and Dividends Service charges on reinvestment plans, Service Charges on Dividend Reinvestment Plans Dues, Dues to Chambers of Commerce and Professional Societies (see also Expenses) (see also Fees) Chambers of Commerce, Dues to Chambers of Commerce and Professional Societies Club, Club Dues Lobbying, Dues used for lobbying. Where can i file my 2012 taxes for free Professional societies, Dues to Chambers of Commerce and Professional Societies Union, Union Dues and Expenses E Education, Educator Expenses, Education Expenses During Unemployment Education expenses, Work-Related Education, More information. Where can i file my 2012 taxes for free Employee business expenses Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Where can i file my 2012 taxes for free Performing artists, Performing Artists Unreimbursed, Unreimbursed Employee Expenses Employment Agency fees, Employment and outplacement agency fees. Where can i file my 2012 taxes for free Breach of contract, Damages for Breach of Employment Contract Entertainers and musicians (see Performing artists) Entertainment expenses, Meals and entertainment. Where can i file my 2012 taxes for free Estates Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Expenses, Dues to Chambers of Commerce and Professional Societies, Education Expenses During Unemployment (see also Dues) (see also Fees) Adoption, Adoption Expenses Campaign, Campaign Expenses Capital, Capital Expenses Commuting, Commuting Expenses Education Work-related, Work-Related Education Educator, Educator Expenses Qualified, Qualified expenses. Where can i file my 2012 taxes for free Educator Expenses, Eligible educator. Where can i file my 2012 taxes for free Employee business (see Employee business expenses) Entertainment, Meals and entertainment. Where can i file my 2012 taxes for free Funeral and burial, List of Nondeductible Expenses Gifts, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging, Gift expenses. Where can i file my 2012 taxes for free Health spa, Health Spa Expenses Hobby, Hobby Expenses Home office, Home Office Impairment-related, Impairment-Related Work Expenses Investment, Investment Fees and Expenses, Investment-Related Seminars Job search, Job Search Expenses Legal (see Legal expenses) Local lodging, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Meals, Meals and entertainment. Where can i file my 2012 taxes for free , Lunches With Co-workers Meals and entertainment, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Nondeductible, Nondeductible Expenses Over limit, educator, Educator expenses over limit. Where can i file my 2012 taxes for free Personal, Nondeductible Expenses Production of income, Other Expenses Professional promotion, Professional Reputation Tax-exempt income, Tax-Exempt Income Expenses Travel and transportation, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Travel as education, Travel as education. Where can i file my 2012 taxes for free F Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Fees, Dues to Chambers of Commerce and Professional Societies (see also Dues) (see also Expenses) Appraisal, Appraisal Fees Check-writing, Check-Writing Fees on Personal Account Employment and outplacement agency, Employment and outplacement agency fees. Where can i file my 2012 taxes for free Investment, Fees To Collect Interest and Dividends, Investment Fees and Expenses IRA trustee, Trustee's Administrative Fees for IRA Legal (see Legal expenses) License, Licenses and Regulatory Fees Professional accreditation, Professional Accreditation Fees Fines, Fines or Penalties Form 2106 Employee business expenses, Form 2106 and Form 2106-EZ. Where can i file my 2012 taxes for free Form 2106-EZ Employee business expenses, Form 2106 and Form 2106-EZ. Where can i file my 2012 taxes for free Form 4562 Depreciation and amortization, Reporting your depreciation deduction. Where can i file my 2012 taxes for free , Depreciation. Where can i file my 2012 taxes for free , Computer used in a home office. Where can i file my 2012 taxes for free Free tax services, Free help with your tax return. Where can i file my 2012 taxes for free Funeral expenses, List of Nondeductible Expenses G Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Government employees Federal criminal investigation and prosecution travel expenses, Federal crime investigation and prosecution. Where can i file my 2012 taxes for free State or local government officials paid on fee basis, Officials Paid on a Fee Basis H Health spa, Health Spa Expenses Help (see Tax help) Hobbies, Hobby Expenses Home Security system, Home Security System Telephone service, Residential Telephone Service Home office Computers, Computer used in a home office. Where can i file my 2012 taxes for free Expenses, Home Office Principal place of business, Principal place of business. Where can i file my 2012 taxes for free Travel and transportation expenses, Home office. Where can i file my 2012 taxes for free I Impairment-related work expenses, Impairment-Related Work Expenses Income aid payment, Repayment of Income Aid Payment Income in respect of decedent Estate tax, Federal Estate Tax on Income in Respect of a Decedent Individual retirement arrangements (IRAs) Trustees' fees, Trustee's Administrative Fees for IRA Insurance Business liability, Business Liability Insurance Life insurance, Life Insurance Premiums Malpractice, Unreimbursed Employee Expenses Personal disability, List of Nondeductible Expenses Interest income Fees to collect, Fees To Collect Interest and Dividends Investments Annuity, unrecovered investment in, Unrecovered Investment in Annuity Deposits, losses on, Loss on Deposits Fees and expenses, Investment Fees and Expenses Seminars, Investment-Related Seminars Itemized deductions Deductions not subject to 2% limit, Deductions Not Subject to the 2% Limit Deductions subject to 2% limit, Introduction, Deductions Subject to the 2% Limit How to report, How To Report J Job search, Job Search Expenses, Travel and transportation expenses. Where can i file my 2012 taxes for free K Kickbacks, List of Nondeductible Expenses L Legal expenses Job-related, Legal Fees Personal, Personal Legal Expenses Political campaigns, Legal fees. Where can i file my 2012 taxes for free Production of income, Legal Expenses Unlawful discrimination claims, Legal Expenses Licenses Fees, Licenses and Regulatory Fees Life insurance, Life Insurance Premiums Lobbying, Lobbying and political activities. Where can i file my 2012 taxes for free , Lobbying Expenses, Exceptions. Where can i file my 2012 taxes for free Local transportation, Local transportation expenses. Where can i file my 2012 taxes for free Losses Casualties and thefts, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Deposits, Loss on Deposits Gambling, Gambling Losses Up to the Amount of Gambling Winnings IRA, Loss on IRA Mislaid cash or property, Lost or Mislaid Cash or Property Partnership, Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 Roth IRA, Loss on IRA M Mail carriers, rural, Rural Mail Carriers' Vehicle Expenses Malpractice insurance, Unreimbursed Employee Expenses Meal and lodging expenses, Meals and entertainment. Where can i file my 2012 taxes for free Lunches with coworkers, Lunches With Co-workers Working late, Meals While Working Late Medical examinations, Unreimbursed Employee Expenses Mileage rate, What's New Missing children, photographs of, Reminders Mutual funds Indirect deductions, Indirect Deductions of Pass-Through Entities N Nondeductible expenses, Nondeductible Expenses, Wristwatches Not-for-profit activities, Hobby Expenses O Occupational taxes, Occupational Taxes Office Home (see Home office) Rent, Clerical Help and Office Rent Outplacement agency fees, Employment and outplacement agency fees. Where can i file my 2012 taxes for free P Partnerships Indirect deductions, Indirect Deductions of Pass-Through Entities Pass-through entities, Indirect Deductions of Pass-Through Entities Passport expense, Unreimbursed Employee Expenses Penalties, Fines or Penalties Performing artists, Performing Artists Work clothes, Work Clothes and Uniforms Personal expenses, Nondeductible Expenses, Wristwatches Political contributions, Lobbying and political activities. Where can i file my 2012 taxes for free , Political Contributions Campaign expenses, Campaign Expenses Ponzi-type investment schemes, Losses From Ponzi-type Investment Schemes Postal workers, Rural Mail Carriers' Vehicle Expenses Production of income expenses, Other Expenses, Loss on IRA Professional accreditation fees, Professional Accreditation Fees Professional journals, Unreimbursed Employee Expenses Professional reputation and marketing, Professional Reputation Professional societies dues, Lobbying and political activities. Where can i file my 2012 taxes for free Prosecution travel expenses, Federal crime investigation and prosecution. Where can i file my 2012 taxes for free Protective clothing, Protective clothing. Where can i file my 2012 taxes for free Publications (see Tax help) R Recordkeeping requirements Computer used for home and business, Depreciation on Computers Deductions, to verify, Introduction Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Home office, Home Office Relief fund contributions, Relief Fund Contributions Rent Office, Clerical Help and Office Rent Safe deposit box, Safe Deposit Box Rent Repayments Claim of right, Repayments Under Claim of Right Income, Repayments of Income Income aid payments, Unreimbursed Employee Expenses Social Security benefits, Repayments of Social Security Benefits Reporting requirements Armed Forces reservists, Armed Forces reservists. Where can i file my 2012 taxes for free Computer used in a home office, Computer used in a home office. Where can i file my 2012 taxes for free Depreciation, Depreciation. Where can i file my 2012 taxes for free Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Where can i file my 2012 taxes for free Impairment-related work expenses, Impairment-related work expenses. Where can i file my 2012 taxes for free Itemized deductions, How To Report Tax preparation fees, Tax preparation fees. Where can i file my 2012 taxes for free Research expenses, Research Expenses of a College Professor Résumé, Résumé. Where can i file my 2012 taxes for free Rural mail carriers, Rural Mail Carriers' Vehicle Expenses S S corporations Indirect deductions, Indirect Deductions of Pass-Through Entities Safe deposit box, Safe Deposit Box Rent Security systems, home, Home Security System Seminars, investment-related, Investment-Related Seminars Service charges on dividend reinvestment plans, Service Charges on Dividend Reinvestment Plans Social Security repayments, Repayments of Social Security Benefits State or local governments Officials paid on fee basis, Officials Paid on a Fee Basis Stockholders' meeting expenses, Stockholders' Meetings T Tax help, How To Get Tax Help Tax-exempt income expenses, Tax-Exempt Income Expenses Taxes Estate tax, Federal Estate Tax on Income in Respect of a Decedent Occupational, Occupational Taxes Telephones Cell phone, Depreciation on Computers Residential service, Residential Telephone Service Theft losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Tools, Tools Used in Your Work Travel and transportation expenses, Local lodging. Where can i file my 2012 taxes for free , Additional information. Where can i file my 2012 taxes for free Another individual, paid by taxpayer, Travel Expenses for Another Individual Armed forces reservists, Armed Forces reservists traveling more than 100 miles from home. Where can i file my 2012 taxes for free Commuting, Commuting Expenses Criminal investigations and prosecutions, Federal crime investigation and prosecution. Where can i file my 2012 taxes for free Education, Travel as education. Where can i file my 2012 taxes for free Indefinite work assignments, Indefinite work assignment. Where can i file my 2012 taxes for free Job search, Travel and transportation expenses. Where can i file my 2012 taxes for free Local transportation, Local transportation expenses. Where can i file my 2012 taxes for free Research, Research Expenses of a College Professor Temporary work assignments, Temporary work assignment. Where can i file my 2012 taxes for free Trustees IRA administrative fees, Trustee's Administrative Fees for IRA TTY/TDD information, How To Get Tax Help U Unemployment and education expenses, Education Expenses During Unemployment Unemployment benefit fund contributions, Voluntary Unemployment Benefit Fund Contributions Uniforms, military, Military uniforms. Where can i file my 2012 taxes for free Union dues, Union Dues and Expenses Unreimbursed employee expenses, Unreimbursed Employee Expenses, Military uniforms. Where can i file my 2012 taxes for free W Wagering winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Work Clothes and uniforms, Work Clothes and Uniforms Impairment-related expenses, Impairment-Related Work Expenses Supplies, Unreimbursed Employee Expenses Tools, Unreimbursed Employee Expenses, Tools Used in Your Work Travel and transportation expenses, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Wristwatches, List of Nondeductible Expenses, Wristwatches Prev  Up     Home   More Online Publications
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Page Last Reviewed or Updated: 07-Mar-2014

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The Where Can I File My 2012 Taxes For Free

Where can i file my 2012 taxes for free Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. Where can i file my 2012 taxes for free General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. Where can i file my 2012 taxes for free Several assets. Where can i file my 2012 taxes for free Special situations. Where can i file my 2012 taxes for free Schedule D (Form 1040). Where can i file my 2012 taxes for free Form 4797. Where can i file my 2012 taxes for free How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Where can i file my 2012 taxes for free The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. Where can i file my 2012 taxes for free The installment sales method cannot be used for the following. Where can i file my 2012 taxes for free Sale of inventory. Where can i file my 2012 taxes for free   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. Where can i file my 2012 taxes for free See Sale of a Business under Other Rules, later. Where can i file my 2012 taxes for free Dealer sales. Where can i file my 2012 taxes for free   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. Where can i file my 2012 taxes for free This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. Where can i file my 2012 taxes for free However, the rule does not apply to an installment sale of property used or produced in farming. Where can i file my 2012 taxes for free Special rule. Where can i file my 2012 taxes for free   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. Where can i file my 2012 taxes for free For more information, see section 453(l). Where can i file my 2012 taxes for free Stock or securities. Where can i file my 2012 taxes for free   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. Where can i file my 2012 taxes for free You must report the entire gain on the sale in the year in which the trade date falls. Where can i file my 2012 taxes for free Installment obligation. Where can i file my 2012 taxes for free   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. Where can i file my 2012 taxes for free General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. Where can i file my 2012 taxes for free See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. Where can i file my 2012 taxes for free Sale at a loss. Where can i file my 2012 taxes for free   If your sale results in a loss, you cannot use the installment method. Where can i file my 2012 taxes for free If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. Where can i file my 2012 taxes for free Unstated interest. Where can i file my 2012 taxes for free   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. Where can i file my 2012 taxes for free See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Where can i file my 2012 taxes for free Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. Where can i file my 2012 taxes for free Each payment on an installment sale usually consists of the following three parts. Where can i file my 2012 taxes for free Interest income. Where can i file my 2012 taxes for free Return of your adjusted basis in the property. Where can i file my 2012 taxes for free Gain on the sale. Where can i file my 2012 taxes for free In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. Where can i file my 2012 taxes for free You do not include in income the part that is the return of your basis in the property. Where can i file my 2012 taxes for free Basis is the amount of your investment in the property for installment sale purposes. Where can i file my 2012 taxes for free Interest Income You must report interest as ordinary income. Where can i file my 2012 taxes for free Interest is generally not included in a down payment. Where can i file my 2012 taxes for free However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Where can i file my 2012 taxes for free Interest provided in the agreement is called stated interest. Where can i file my 2012 taxes for free If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Where can i file my 2012 taxes for free See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Where can i file my 2012 taxes for free Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. Where can i file my 2012 taxes for free A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). Where can i file my 2012 taxes for free Figuring adjusted basis for installment sale purposes. Where can i file my 2012 taxes for free   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. Where can i file my 2012 taxes for free When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. Where can i file my 2012 taxes for free Worksheet A. Where can i file my 2012 taxes for free Figuring Adjusted Basis and Gross Profit Percentage 1. Where can i file my 2012 taxes for free Enter the selling price for the property   2. Where can i file my 2012 taxes for free Enter your adjusted basis for the property     3. Where can i file my 2012 taxes for free Enter your selling expenses     4. Where can i file my 2012 taxes for free Enter any depreciation recapture     5. Where can i file my 2012 taxes for free Add lines 2, 3, and 4. Where can i file my 2012 taxes for free  This is your adjusted basis for installment sale purposes   6. Where can i file my 2012 taxes for free Subtract line 5 from line 1. Where can i file my 2012 taxes for free If zero or less, enter -0-. Where can i file my 2012 taxes for free  This is your gross profit     If the amount entered on line 6 is zero, stop here. Where can i file my 2012 taxes for free You cannot use the installment method. Where can i file my 2012 taxes for free   7. Where can i file my 2012 taxes for free Enter the contract price for the property   8. Where can i file my 2012 taxes for free Divide line 6 by line 7. Where can i file my 2012 taxes for free This is your gross profit percentage   Selling price. Where can i file my 2012 taxes for free   The selling price is the total cost of the property to the buyer and includes any of the following. Where can i file my 2012 taxes for free Any money you are to receive. Where can i file my 2012 taxes for free The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). Where can i file my 2012 taxes for free Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). Where can i file my 2012 taxes for free Any of your selling expenses the buyer pays. Where can i file my 2012 taxes for free   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Where can i file my 2012 taxes for free Adjusted basis for installment sale purposes. Where can i file my 2012 taxes for free   Your adjusted basis is the total of the following three items. Where can i file my 2012 taxes for free Adjusted basis. Where can i file my 2012 taxes for free Selling expenses. Where can i file my 2012 taxes for free Depreciation recapture. Where can i file my 2012 taxes for free Adjusted basis. Where can i file my 2012 taxes for free   Basis is your investment in the property for installment sale purposes. Where can i file my 2012 taxes for free The way you figure basis depends on how you acquire the property. Where can i file my 2012 taxes for free The basis of property you buy is generally its cost. Where can i file my 2012 taxes for free The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Where can i file my 2012 taxes for free   While you own property, various events may change your original basis. Where can i file my 2012 taxes for free Some events, such as adding rooms or making permanent improvements, increase basis. Where can i file my 2012 taxes for free Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Where can i file my 2012 taxes for free The result is adjusted basis. Where can i file my 2012 taxes for free   For more information on how to figure basis and adjusted basis, see Publication 551. Where can i file my 2012 taxes for free For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. Where can i file my 2012 taxes for free Selling expenses. Where can i file my 2012 taxes for free   Selling expenses relate to the sale of the property. Where can i file my 2012 taxes for free They include commissions, attorney fees, and any other expenses paid on the sale. Where can i file my 2012 taxes for free Selling expenses are added to the basis of the sold property. Where can i file my 2012 taxes for free Depreciation recapture. Where can i file my 2012 taxes for free   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Where can i file my 2012 taxes for free See Depreciation Recapture Income under Other Rules, later. Where can i file my 2012 taxes for free Gross profit. Where can i file my 2012 taxes for free   Gross profit is the total gain you report on the installment method. Where can i file my 2012 taxes for free   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Where can i file my 2012 taxes for free If the property you sold was your home, subtract from the gross profit any gain you can exclude. Where can i file my 2012 taxes for free See Sale of Your Home , later, under Reporting Installment Sale Income. Where can i file my 2012 taxes for free Contract price. Where can i file my 2012 taxes for free   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. Where can i file my 2012 taxes for free Gross profit percentage. Where can i file my 2012 taxes for free   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Where can i file my 2012 taxes for free This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Where can i file my 2012 taxes for free   The gross profit percentage generally remains the same for each payment you receive. Where can i file my 2012 taxes for free However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sell property at a contract price of $6,000 and your gross profit is $1,500. Where can i file my 2012 taxes for free Your gross profit percentage is 25% ($1,500 ÷ $6,000). Where can i file my 2012 taxes for free After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. Where can i file my 2012 taxes for free The remainder (balance) of each payment is the tax-free return of your adjusted basis. Where can i file my 2012 taxes for free Amount to report as installment sale income. Where can i file my 2012 taxes for free   Multiply the payments you receive each year (less interest) by the gross profit percentage. Where can i file my 2012 taxes for free The result is your installment sale income for the tax year. Where can i file my 2012 taxes for free In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Where can i file my 2012 taxes for free A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Where can i file my 2012 taxes for free For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. Where can i file my 2012 taxes for free Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. Where can i file my 2012 taxes for free You then must refigure the gross profit percentage for the remaining payments. Where can i file my 2012 taxes for free Refigure your gross profit using Worksheet B. Where can i file my 2012 taxes for free You will spread any remaining gain over future installments. Where can i file my 2012 taxes for free Worksheet B. Where can i file my 2012 taxes for free New Gross Profit Percentage — Selling Price Reduced 1. Where can i file my 2012 taxes for free Enter the reduced selling  price for the property   2. Where can i file my 2012 taxes for free Enter your adjusted  basis for the  property     3. Where can i file my 2012 taxes for free Enter your selling  expenses     4. Where can i file my 2012 taxes for free Enter any depreciation  recapture     5. Where can i file my 2012 taxes for free Add lines 2, 3, and 4. Where can i file my 2012 taxes for free   6. Where can i file my 2012 taxes for free Subtract line 5 from line 1. Where can i file my 2012 taxes for free  This is your adjusted  gross profit   7. Where can i file my 2012 taxes for free Enter any installment sale  income reported in  prior year(s)   8. Where can i file my 2012 taxes for free Subtract line 7 from line 6   9. Where can i file my 2012 taxes for free Future installments   10. Where can i file my 2012 taxes for free Divide line 8 by line 9. Where can i file my 2012 taxes for free  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free In 2011, you sold land with a basis of $40,000 for $100,000. Where can i file my 2012 taxes for free Your gross profit was $60,000. Where can i file my 2012 taxes for free You received a $20,000 down payment and the buyer's note for $80,000. Where can i file my 2012 taxes for free The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. Where can i file my 2012 taxes for free Your gross profit percentage is 60%. Where can i file my 2012 taxes for free You reported a gain of $12,000 on each payment received in 2011 and 2012. Where can i file my 2012 taxes for free In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. Where can i file my 2012 taxes for free The new gross profit percentage, 46. Where can i file my 2012 taxes for free 67%, is figured on Example—Worksheet B. Where can i file my 2012 taxes for free You will report a gain of $7,000 (46. Where can i file my 2012 taxes for free 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. Where can i file my 2012 taxes for free Example — Worksheet B. Where can i file my 2012 taxes for free New Gross Profit Percentage — Selling Price Reduced 1. Where can i file my 2012 taxes for free Enter the reduced selling  price for the property 85,000 2. Where can i file my 2012 taxes for free Enter your adjusted  basis for the  property 40,000   3. Where can i file my 2012 taxes for free Enter your selling  expenses -0-   4. Where can i file my 2012 taxes for free Enter any depreciation  recapture -0-   5. Where can i file my 2012 taxes for free Add lines 2, 3, and 4. Where can i file my 2012 taxes for free 40,000 6. Where can i file my 2012 taxes for free Subtract line 5 from line 1. Where can i file my 2012 taxes for free  This is your adjusted  gross profit 45,000 7. Where can i file my 2012 taxes for free Enter any installment sale  income reported in  prior year(s) 24,000 8. Where can i file my 2012 taxes for free Subtract line 7 from line 6 21,000 9. Where can i file my 2012 taxes for free Future installments 45,000 10. Where can i file my 2012 taxes for free Divide line 8 by line 9. Where can i file my 2012 taxes for free  This is your new gross profit percentage* 46. Where can i file my 2012 taxes for free 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Where can i file my 2012 taxes for free Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. Where can i file my 2012 taxes for free You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. Where can i file my 2012 taxes for free See Schedule D (Form 1040) and Form 4797 , later. Where can i file my 2012 taxes for free If the property was your main home, you may be able to exclude part or all of the gain. Where can i file my 2012 taxes for free See Sale of Your Home , later. Where can i file my 2012 taxes for free Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Where can i file my 2012 taxes for free Attach it to your tax return for each year. Where can i file my 2012 taxes for free Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. Where can i file my 2012 taxes for free Which parts to complete. Where can i file my 2012 taxes for free   Which part to complete depends on whether you are filing the form for the year of sale or a later year. Where can i file my 2012 taxes for free Year of sale. Where can i file my 2012 taxes for free   Complete lines 1 through 4, Part I, and Part II. Where can i file my 2012 taxes for free If you sold property to a related party during the year, also complete Part III. Where can i file my 2012 taxes for free Later years. Where can i file my 2012 taxes for free   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. Where can i file my 2012 taxes for free   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. Where can i file my 2012 taxes for free (After December 31, 1986, the installment method is not available for the sale of marketable securities. Where can i file my 2012 taxes for free ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. Where can i file my 2012 taxes for free Complete Part III unless you received the final payment during the tax year. Where can i file my 2012 taxes for free   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. Where can i file my 2012 taxes for free Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. Where can i file my 2012 taxes for free Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. Where can i file my 2012 taxes for free Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). Where can i file my 2012 taxes for free If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. Where can i file my 2012 taxes for free Your gain is long-term if you owned the property for more than 1 year when you sold it. Where can i file my 2012 taxes for free Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. Where can i file my 2012 taxes for free All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. Where can i file my 2012 taxes for free For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. Where can i file my 2012 taxes for free If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. Where can i file my 2012 taxes for free ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. Where can i file my 2012 taxes for free See Publication 523 for information about excluding the gain. Where can i file my 2012 taxes for free If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. Where can i file my 2012 taxes for free Seller-financed mortgage. Where can i file my 2012 taxes for free   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. Where can i file my 2012 taxes for free   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Where can i file my 2012 taxes for free   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. Where can i file my 2012 taxes for free   If either person fails to include the other person's SSN, a $50 penalty will be assessed. Where can i file my 2012 taxes for free Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. Where can i file my 2012 taxes for free The following topics are discussed. Where can i file my 2012 taxes for free Electing out of the installment method. Where can i file my 2012 taxes for free Payments received or considered received. Where can i file my 2012 taxes for free Escrow account. Where can i file my 2012 taxes for free Depreciation recapture income. Where can i file my 2012 taxes for free Sale to a related person. Where can i file my 2012 taxes for free Like-kind exchange. Where can i file my 2012 taxes for free Contingent payment sale. Where can i file my 2012 taxes for free Single sale of several assets. Where can i file my 2012 taxes for free Sale of a business. Where can i file my 2012 taxes for free Unstated interest and original issue discount. Where can i file my 2012 taxes for free Disposition of an installment obligation. Where can i file my 2012 taxes for free Repossession. Where can i file my 2012 taxes for free Interest on deferred tax. Where can i file my 2012 taxes for free Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. Where can i file my 2012 taxes for free To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. Where can i file my 2012 taxes for free Notes, mortgages, and land contracts are examples of obligations that are included at FMV. Where can i file my 2012 taxes for free You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. Where can i file my 2012 taxes for free If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sold a parcel of land for $50,000. Where can i file my 2012 taxes for free You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. Where can i file my 2012 taxes for free The buyer gave you a note for $40,000. Where can i file my 2012 taxes for free The note had an FMV of $40,000. Where can i file my 2012 taxes for free You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. Where can i file my 2012 taxes for free The land cost $25,000, and you owned it for more than one year. Where can i file my 2012 taxes for free You decide to elect out of the installment method and report the entire gain in the year of sale. Where can i file my 2012 taxes for free Gain realized:     Selling price $50,000 Minus: Property's adj. Where can i file my 2012 taxes for free basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. Where can i file my 2012 taxes for free basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. Where can i file my 2012 taxes for free You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. Where can i file my 2012 taxes for free The interest on the note is ordinary income and is reported as interest income each year. Where can i file my 2012 taxes for free How to elect out. Where can i file my 2012 taxes for free   To make this election, do not report your sale on Form 6252. Where can i file my 2012 taxes for free Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. Where can i file my 2012 taxes for free When to elect out. Where can i file my 2012 taxes for free   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Where can i file my 2012 taxes for free Automatic six-month extension. Where can i file my 2012 taxes for free   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Where can i file my 2012 taxes for free Write “Filed pursuant to section 301. Where can i file my 2012 taxes for free 9100-2” at the top of the amended return and file it where the original return was filed. Where can i file my 2012 taxes for free Revoking the election. Where can i file my 2012 taxes for free   Once made, the election can be revoked only with IRS approval. Where can i file my 2012 taxes for free A revocation is retroactive. Where can i file my 2012 taxes for free You will not be allowed to revoke the election if either of the following applies. Where can i file my 2012 taxes for free One of the purposes is to avoid federal income tax. Where can i file my 2012 taxes for free The tax year in which any payment was received has closed. Where can i file my 2012 taxes for free Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. Where can i file my 2012 taxes for free In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Where can i file my 2012 taxes for free These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. Where can i file my 2012 taxes for free However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. Where can i file my 2012 taxes for free Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Where can i file my 2012 taxes for free Include these expenses in the selling and contract prices when figuring the gross profit percentage. Where can i file my 2012 taxes for free Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Where can i file my 2012 taxes for free Mortgage not more than basis. Where can i file my 2012 taxes for free   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. Where can i file my 2012 taxes for free It is considered a recovery of your basis. Where can i file my 2012 taxes for free The contract price is the selling price minus the mortgage. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sell property with an adjusted basis of $19,000. Where can i file my 2012 taxes for free You have selling expenses of $1,000. Where can i file my 2012 taxes for free The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). Where can i file my 2012 taxes for free The selling price is $25,000 ($15,000 + $10,000). Where can i file my 2012 taxes for free Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Where can i file my 2012 taxes for free The contract price is $10,000 ($25,000 − $15,000 mortgage). Where can i file my 2012 taxes for free Your gross profit percentage is 50% ($5,000 ÷ $10,000). Where can i file my 2012 taxes for free You report half of each $2,000 payment received as gain from the sale. Where can i file my 2012 taxes for free You also report all interest you receive as ordinary income. Where can i file my 2012 taxes for free Mortgage more than basis. Where can i file my 2012 taxes for free   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Where can i file my 2012 taxes for free The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Where can i file my 2012 taxes for free   To figure the contract price, subtract the mortgage from the selling price. Where can i file my 2012 taxes for free This is the total amount (other than interest) you will receive directly from the buyer. Where can i file my 2012 taxes for free Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Where can i file my 2012 taxes for free The contract price is then the same as your gross profit from the sale. Where can i file my 2012 taxes for free    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free The selling price for your property is $9,000. Where can i file my 2012 taxes for free The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Where can i file my 2012 taxes for free Your adjusted basis in the property is $4,400. Where can i file my 2012 taxes for free You have selling expenses of $600, for a total installment sale basis of $5,000. Where can i file my 2012 taxes for free The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Where can i file my 2012 taxes for free This amount is included in the contract price and treated as a payment received in the year of sale. Where can i file my 2012 taxes for free The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. Where can i file my 2012 taxes for free Report 100% of each payment (less interest) as gain from the sale. Where can i file my 2012 taxes for free Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. Where can i file my 2012 taxes for free Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. Where can i file my 2012 taxes for free You are considered to receive a payment equal to the outstanding canceled debt. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. Where can i file my 2012 taxes for free On April 4, 2013, she bought the land for $70,000. Where can i file my 2012 taxes for free At that time, $30,000 of her loan to you was outstanding. Where can i file my 2012 taxes for free She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. Where can i file my 2012 taxes for free She did not assume an existing mortgage. Where can i file my 2012 taxes for free She canceled the $30,000 debt you owed her. Where can i file my 2012 taxes for free You are considered to have received a $30,000 payment at the time of the sale. Where can i file my 2012 taxes for free Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. Where can i file my 2012 taxes for free If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Where can i file my 2012 taxes for free Compare the debt to your installment sale basis in the property being sold. Where can i file my 2012 taxes for free If the debt is less than your installment sale basis, none of it is treated as a payment. Where can i file my 2012 taxes for free If it is more, only the difference is treated as a payment. Where can i file my 2012 taxes for free If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. Where can i file my 2012 taxes for free These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . Where can i file my 2012 taxes for free However, they apply only to the following types of debt the buyer assumes. Where can i file my 2012 taxes for free Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Where can i file my 2012 taxes for free Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Where can i file my 2012 taxes for free If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. Where can i file my 2012 taxes for free The value of the assumed debt is then considered a payment to you in the year of sale. Where can i file my 2012 taxes for free Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. Where can i file my 2012 taxes for free However, see Like-Kind Exchange , later. Where can i file my 2012 taxes for free Generally, the amount of the payment is the property's FMV on the date you receive it. Where can i file my 2012 taxes for free Exception. Where can i file my 2012 taxes for free   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. Where can i file my 2012 taxes for free See Unstated Interest and Original Issue Discount (OID) , later. Where can i file my 2012 taxes for free Debt not payable on demand. Where can i file my 2012 taxes for free   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. Where can i file my 2012 taxes for free This is true even if the debt is guaranteed by a third party, including a government agency. Where can i file my 2012 taxes for free Fair market value (FMV). Where can i file my 2012 taxes for free   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. Where can i file my 2012 taxes for free Third-party note. Where can i file my 2012 taxes for free   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. Where can i file my 2012 taxes for free Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. Where can i file my 2012 taxes for free The excess of the note's face value over its FMV is interest. Where can i file my 2012 taxes for free Exclude this interest in determining the selling price of the property. Where can i file my 2012 taxes for free However, see Exception under Property Used As a Payment, earlier. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sold real estate in an installment sale. Where can i file my 2012 taxes for free As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. Where can i file my 2012 taxes for free The FMV of the third-party note at the time of the sale was $30,000. Where can i file my 2012 taxes for free This amount, not $50,000, is a payment to you in the year of sale. Where can i file my 2012 taxes for free The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. Where can i file my 2012 taxes for free The remaining 40% is interest taxed as ordinary income. Where can i file my 2012 taxes for free Bond. Where can i file my 2012 taxes for free   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. Where can i file my 2012 taxes for free For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. Where can i file my 2012 taxes for free    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. Where can i file my 2012 taxes for free However, see Exception under Property Used As a Payment, earlier. Where can i file my 2012 taxes for free Buyer's note. Where can i file my 2012 taxes for free   The buyer's note (unless payable on demand) is not considered payment on the sale. Where can i file my 2012 taxes for free However, its full face value is included when figuring the selling price and the contract price. Where can i file my 2012 taxes for free Payments you receive on the note are used to figure your gain in the year received. Where can i file my 2012 taxes for free Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. Where can i file my 2012 taxes for free This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. Where can i file my 2012 taxes for free It does not apply to the following dispositions. Where can i file my 2012 taxes for free Sales of property used or produced in farming. Where can i file my 2012 taxes for free Sales of personal-use property. Where can i file my 2012 taxes for free Qualifying sales of time-shares and residential lots. Where can i file my 2012 taxes for free The net debt proceeds are the gross debt minus the direct expenses of getting the debt. Where can i file my 2012 taxes for free The amount treated as a payment is considered received on the later of the following dates. Where can i file my 2012 taxes for free The date the debt becomes secured. Where can i file my 2012 taxes for free The date you receive the debt proceeds. Where can i file my 2012 taxes for free A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. Where can i file my 2012 taxes for free For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. Where can i file my 2012 taxes for free Limit. Where can i file my 2012 taxes for free   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. Where can i file my 2012 taxes for free The total contract price on the installment sale. Where can i file my 2012 taxes for free Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. Where can i file my 2012 taxes for free Installment payments. Where can i file my 2012 taxes for free   The pledge rule accelerates the reporting of the installment obligation payments. Where can i file my 2012 taxes for free Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. Where can i file my 2012 taxes for free Exception. Where can i file my 2012 taxes for free   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. Where can i file my 2012 taxes for free The debt was outstanding on December 17, 1987. Where can i file my 2012 taxes for free The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. Where can i file my 2012 taxes for free   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. Where can i file my 2012 taxes for free   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. Where can i file my 2012 taxes for free Any excess is treated as a payment on the installment obligation. Where can i file my 2012 taxes for free Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. Where can i file my 2012 taxes for free These sales cannot be reported on the installment method. Where can i file my 2012 taxes for free The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. Where can i file my 2012 taxes for free When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sell property for $100,000. Where can i file my 2012 taxes for free The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. Where can i file my 2012 taxes for free You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. Where can i file my 2012 taxes for free You report the entire gain in the year of sale. Where can i file my 2012 taxes for free Escrow established in a later year. Where can i file my 2012 taxes for free   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. Where can i file my 2012 taxes for free Substantial restriction. Where can i file my 2012 taxes for free   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. Where can i file my 2012 taxes for free For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. Where can i file my 2012 taxes for free Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. Where can i file my 2012 taxes for free Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Where can i file my 2012 taxes for free Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. Where can i file my 2012 taxes for free The recapture income is also included in Part I of Form 6252. Where can i file my 2012 taxes for free However, the gain equal to the recapture income is reported in full in the year of the sale. Where can i file my 2012 taxes for free Only the gain greater than the recapture income is reported on the installment method. Where can i file my 2012 taxes for free For more information on depreciation recapture, see chapter 3 in Publication 544. Where can i file my 2012 taxes for free The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. Where can i file my 2012 taxes for free Determining gross profit is discussed under General Rules , earlier. Where can i file my 2012 taxes for free Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. Where can i file my 2012 taxes for free If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. Where can i file my 2012 taxes for free These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. Where can i file my 2012 taxes for free Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. Where can i file my 2012 taxes for free Instead, all payments to be received are considered received in the year of sale. Where can i file my 2012 taxes for free However, see Exception , below. Where can i file my 2012 taxes for free Depreciable property for this rule is any property the purchaser can depreciate. Where can i file my 2012 taxes for free Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. Where can i file my 2012 taxes for free In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. Where can i file my 2012 taxes for free The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. Where can i file my 2012 taxes for free Exception. Where can i file my 2012 taxes for free   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. Where can i file my 2012 taxes for free You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. Where can i file my 2012 taxes for free Related person. Where can i file my 2012 taxes for free   Related persons include the following. Where can i file my 2012 taxes for free A person and all controlled entities with respect to that person. Where can i file my 2012 taxes for free A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. Where can i file my 2012 taxes for free Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. Where can i file my 2012 taxes for free Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. Where can i file my 2012 taxes for free   For information about which entities are controlled entities, see section 1239(c). Where can i file my 2012 taxes for free Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. Where can i file my 2012 taxes for free The related person makes the second disposition before making all payments on the first disposition. Where can i file my 2012 taxes for free The related person disposes of the property within 2 years of the first disposition. Where can i file my 2012 taxes for free This rule does not apply if the property involved is marketable securities. Where can i file my 2012 taxes for free Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. Where can i file my 2012 taxes for free See Exception , later. Where can i file my 2012 taxes for free Related person. Where can i file my 2012 taxes for free   Related persons include the following. Where can i file my 2012 taxes for free Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. Where can i file my 2012 taxes for free A partnership or estate and a partner or beneficiary. Where can i file my 2012 taxes for free A trust (other than a section 401(a) employees trust) and a beneficiary. Where can i file my 2012 taxes for free A trust and an owner of the trust. Where can i file my 2012 taxes for free Two corporations that are members of the same controlled group as defined in section 267(f). Where can i file my 2012 taxes for free The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Where can i file my 2012 taxes for free A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. Where can i file my 2012 taxes for free An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Where can i file my 2012 taxes for free A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Where can i file my 2012 taxes for free The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Where can i file my 2012 taxes for free Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Where can i file my 2012 taxes for free An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. Where can i file my 2012 taxes for free A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Where can i file my 2012 taxes for free An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. Where can i file my 2012 taxes for free Example 1. Where can i file my 2012 taxes for free In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. Where can i file my 2012 taxes for free His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. Where can i file my 2012 taxes for free His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). Where can i file my 2012 taxes for free He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. Where can i file my 2012 taxes for free 50). Where can i file my 2012 taxes for free Bob made no improvements to the property and sold it to Alfalfa Inc. Where can i file my 2012 taxes for free , in 2013 for $600,000 after making the payment for that year. Where can i file my 2012 taxes for free The amount realized from the second disposition is $600,000. Where can i file my 2012 taxes for free Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . Where can i file my 2012 taxes for free 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). Where can i file my 2012 taxes for free Example 2. Where can i file my 2012 taxes for free Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. Where can i file my 2012 taxes for free The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . Where can i file my 2012 taxes for free 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. Where can i file my 2012 taxes for free They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. Where can i file my 2012 taxes for free In 2016, he receives the final $100,000 payment. Where can i file my 2012 taxes for free He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . Where can i file my 2012 taxes for free 50 Installment sale income for 2016 $ 50,000 Exception. Where can i file my 2012 taxes for free   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. Where can i file my 2012 taxes for free Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. Where can i file my 2012 taxes for free   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. Where can i file my 2012 taxes for free However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. Where can i file my 2012 taxes for free   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. Where can i file my 2012 taxes for free An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. Where can i file my 2012 taxes for free A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. Where can i file my 2012 taxes for free Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. Where can i file my 2012 taxes for free These trades are known as like-kind exchanges. Where can i file my 2012 taxes for free The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. Where can i file my 2012 taxes for free You do not have to report any part of your gain if you receive only like-kind property. Where can i file my 2012 taxes for free However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. Where can i file my 2012 taxes for free For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. Where can i file my 2012 taxes for free Installment payments. Where can i file my 2012 taxes for free   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. Where can i file my 2012 taxes for free The contract price is reduced by the FMV of the like-kind property received in the trade. Where can i file my 2012 taxes for free The gross profit is reduced by any gain on the trade that can be postponed. Where can i file my 2012 taxes for free Like-kind property received in the trade is not considered payment on the installment obligation. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. Where can i file my 2012 taxes for free He also receives an installment note for $800,000 in the trade. Where can i file my 2012 taxes for free Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. Where can i file my 2012 taxes for free George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). Where can i file my 2012 taxes for free His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). Where can i file my 2012 taxes for free The contract price is $800,000 ($1,000,000 − $200,000). Where can i file my 2012 taxes for free The gross profit percentage is 75% ($600,000 ÷ $800,000). Where can i file my 2012 taxes for free He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. Where can i file my 2012 taxes for free He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). Where can i file my 2012 taxes for free Deferred exchanges. Where can i file my 2012 taxes for free   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. Where can i file my 2012 taxes for free Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. Where can i file my 2012 taxes for free If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. Where can i file my 2012 taxes for free See Regulations section 1. Where can i file my 2012 taxes for free 1031(k)-1(j)(2) for these rules. Where can i file my 2012 taxes for free Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. Where can i file my 2012 taxes for free This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. Where can i file my 2012 taxes for free If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. Where can i file my 2012 taxes for free For rules on using the installment method for a contingent payment sale, see Regulations section 15a. Where can i file my 2012 taxes for free 453-1(c). Where can i file my 2012 taxes for free Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. Where can i file my 2012 taxes for free You also have to allocate part of the selling price to each asset. Where can i file my 2012 taxes for free If you sell assets that constitute a trade or business, see Sale of a Business , later. Where can i file my 2012 taxes for free Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. Where can i file my 2012 taxes for free If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. Where can i file my 2012 taxes for free This becomes the net FMV. Where can i file my 2012 taxes for free A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. Where can i file my 2012 taxes for free However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. Where can i file my 2012 taxes for free It must be reported separately. Where can i file my 2012 taxes for free The remaining assets sold at a gain are reported together. Where can i file my 2012 taxes for free Example. Where can i file my 2012 taxes for free You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. Where can i file my 2012 taxes for free The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. Where can i file my 2012 taxes for free Your installment sale basis for each parcel was $15,000. Where can i file my 2012 taxes for free Your net gain was $85,000 ($130,000 − $45,000). Where can i file my 2012 taxes for free You report the gain on the installment method. Where can i file my 2012 taxes for free The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. Where can i file my 2012 taxes for free The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. Where can i file my 2012 taxes for free The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. Where can i file my 2012 taxes for free You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. Where can i file my 2012 taxes for free Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. Where can i file my 2012 taxes for free You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. Where can i file my 2012 taxes for free The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. Where can i file my 2012 taxes for free You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. Where can i file my 2012 taxes for free However, if parcel C was held for personal use, the loss is not deductible. Where can i file my 2012 taxes for free You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). Where can i file my 2012 taxes for free Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. Where can i file my 2012 taxes for free Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. Where can i file my 2012 taxes for free Assets sold at a loss. Where can i file my 2012 taxes for free Real and personal property eligible for the installment method. Where can i file my 2012 taxes for free Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. Where can i file my 2012 taxes for free Inventory. Where can i file my 2012 taxes for free   The sale of inventories of personal property cannot be reported on the installment method. Where can i file my 2012 taxes for free All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Where can i file my 2012 taxes for free   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. Where can i file my 2012 taxes for free If you do not, each payment must be allocated between the inventory and the other assets sold. Where can i file my 2012 taxes for free   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. Where can i file my 2012 taxes for free Use your basis in the inventory to figure the cost of goods sold. Where can i file my 2012 taxes for free Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. Where can i file my 2012 taxes for free Residual method. Where can i file my 2012 taxes for free   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. Where can i file my 2012 taxes for free This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. Where can i file my 2012 taxes for free   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. Where can i file my 2012 taxes for free This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b). Where can i file my 2012 taxes for free   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. Where can i file my 2012 taxes for free   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). Where can i file my 2012 taxes for free The consideration remaining after this reduction must be allocated among the various business assets in a certain order. Where can i file my 2012 taxes for free   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. Where can i file my 2012 taxes for free Certificates of deposit, U. Where can i file my 2012 taxes for free S. Where can i file my 2012 taxes for free Government securities, foreign currency, and actively traded personal property, including stock and securities. Where can i file my 2012 taxes for free Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. Where can i file my 2012 taxes for free However, see Regulations section 1. Where can i file my 2012 taxes for free 338-6(b)(2)(iii) for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. Where can i file my 2012 taxes for free Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. Where can i file my 2012 taxes for free All other assets except section 197 intangibles. Where can i file my 2012 taxes for free Section 197 intangibles except goodwill and going concern value. Where can i file my 2012 taxes for free Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Where can i file my 2012 taxes for free   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. Where can i file my 2012 taxes for free For example, if an asset is described in both (4) and (6), include it in (4). Where can i file my 2012 taxes for free Agreement. Where can i file my 2012 taxes for free   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. Where can i file my 2012 taxes for free This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Where can i file my 2012 taxes for free Reporting requirement. Where can i file my 2012 taxes for free   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Where can i file my 2012 taxes for free Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. Where can i file my 2012 taxes for free The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Where can i file my 2012 taxes for free Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. Where can i file my 2012 taxes for free The sale of a partnership interest is treated as the sale of a single capital asset. Where can i file my 2012 taxes for free The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. Where can i file my 2012 taxes for free (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. Where can i file my 2012 taxes for free ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. Where can i file my 2012 taxes for free The gain allocated to the other assets can be reported under the installment method. Where can i file my 2012 taxes for free For more information on the treatment of unrealized receivables and inventory, see Publication 541. Where can i file my 2012 taxes for free Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. Where can i file my 2012 taxes for free You received a $100,000 down payment and the buyer's note for $120,000. Where can i file my 2012 taxes for free The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. Where can i file my 2012 taxes for free The total selling price is $220,000. Where can i file my 2012 taxes for free Your selling expenses are $11,000. Where can i file my 2012 taxes for free The selling expenses are divided among all the assets sold, including inventory. Where can i file my 2012 taxes for free Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). Where can i file my 2012 taxes for free The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. Where can i file my 2012 taxes for free Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). Where can i file my 2012 taxes for free The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. Where can i file my 2012 taxes for free The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. Where can i file my 2012 taxes for free   Sale  Price Sale   Exp. Where can i file my 2012 taxes for free Adj. Where can i file my 2012 taxes for free   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. Where can i file my 2012 taxes for free A 71,000 3,550 63,800 3,650 Mch. Where can i file my 2012 taxes for free B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. Where can i file my 2012 taxes for free There is no depreciation recapture income because the building was depreciated using the straight line method. Where can i file my 2012 taxes for free All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. Where can i file my 2012 taxes for free Figure depreciation recapture in Part III of Form 4797. Where can i file my 2012 taxes for free The total depreciation recapture income reported in Part II of Form 4797 is $5,209. Where can i file my 2012 taxes for free This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). Where can i file my 2012 taxes for free These gains are reported in full in the year of sale and are not included in the installment sale computation. Where can i file my 2012 taxes for free Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. Where can i file my 2012 taxes for free The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. Where can i file my 2012 taxes for free The selling price equals the contract price for the installment sale ($108,500). Where can i file my 2012 taxes for free The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. Where can i file my 2012 taxes for free   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). Where can i file my 2012 taxes for free The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. Where can i file my 2012 taxes for free 95 Building— $9,600 ÷ $108,500 8. Where can i file my 2012 taxes for free 85 Goodwill— $17,575 ÷ $108,500 16. Where can i file my 2012 taxes for free 20 Total 48. Where can i file my 2012 taxes for free 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. Where can i file my 2012 taxes for free The selling price for the installment sale is $108,500. Where can i file my 2012 taxes for free This is 49. Where can i file my 2012 taxes for free 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). Where can i file my 2012 taxes for free The selling price of assets not reported on the installment method is $111,500. Where can i file my 2012 taxes for free This is 50. Where can i file my 2012 taxes for free 7% ($111,500 ÷ $220,000) of the total selling price. Where can i file my 2012 taxes for free Multiply principal payments by 49. Where can i file my 2012 taxes for free 3% to determine the part of the payment for the installment sale. Where can i file my 2012 taxes for free The balance, 50. Where can i file my 2012 taxes for free 7%, is for the part reported in the year of the sale. Where can i file my 2012 taxes for free The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. Where can i file my 2012 taxes for free When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. Where can i file my 2012 taxes for free Only the part for the installment sale (49. Where can i file my 2012 taxes for free 3%) is used in the installment sale computation. Where can i file my 2012 taxes for free The only payment received in 2013 is the down payment of $100,000. Where can i file my 2012 taxes for free The part of the payment for the installment sale is $49,300 ($100,000 × 49. Where can i file my 2012 taxes for free 3%). Where can i file my 2012 taxes for free This amount is used in the installment sale computation. Where can i file my 2012 taxes for free Installment income for 2013. Where can i file my 2012 taxes for free   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. Where can i file my 2012 taxes for free Income Land—22. Where can i file my 2012 taxes for free 95% of $49,300 $11,314 Building—8. Where can i file my 2012 taxes for free 85% of $49,300 4,363 Goodwill—16. Where can i file my 2012 taxes for free 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. Where can i file my 2012 taxes for free   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. Where can i file my 2012 taxes for free 3% of the total payments you receive on the buyer's note during the year. Where can i file my 2012 taxes for free Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Where can i file my 2012 taxes for free Interest provided in the contract is called stated interest. Where can i file my 2012 taxes for free If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. Where can i file my 2012 taxes for free If section 483 applies to the contract, this interest is called unstated interest. Where can i file my 2012 taxes for free If section 1274 applies to the contract, this interest is called original issue discount (OID). Where can i file my 2012 taxes for free An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). Where can i file my 2012 taxes for free Treatment of unstated interest and OID. Where can i file my 2012 taxes for free   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Where can i file my 2012 taxes for free As a result, the buyer cannot deduct the unstated interest. Where can i file my 2012 taxes for free The seller must report the unstated interest as income. Where can i file my 2012 taxes for free   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. Where can i file my 2012 taxes for free   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. Where can i file my 2012 taxes for free Rules for the seller. Where can i file my 2012 taxes for free   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. Where can i file my 2012 taxes for free If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. Where can i file my 2012 taxes for free   Include the unstated interest in income based on your regular method of accounting. Where can i file my 2012 taxes for free Include OID in income over the term of the contract. Where can i file my 2012 taxes for free   The OID includible in income each year is based on the constant yield method described in section 1272. Where can i file my 2012 taxes for free (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. Where can i file my 2012 taxes for free )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. Where can i file my 2012 taxes for free Reduce the selling price by any stated principal treated as interest to determine the gain. Where can i file my 2012 taxes for free   Report unstated interest or OID on your tax return, in addition to stated interest. Where can i file my 2012 taxes for free Rules for the buyer. Where can i file my 2012 taxes for free   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. Where can i file my 2012 taxes for free These rules do not apply to personal-use property (for example, property not used in a trade or business). Where can i file my 2012 taxes for free Adequate stated interest. Where can i file my 2012 taxes for free   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. Where can i file my 2012 taxes for free The present value of a payment is determined based on the test rate of interest, defined next. Where can i file my 2012 taxes for free (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. Where can i file my 2012 taxes for free ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. Where can i file my 2012 taxes for free Test rate of interest. Where can i file my 2012 taxes for free   The test rate of interest for a contract is the 3-month rate. 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