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Where To File 2009 Tax Return

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Where To File 2009 Tax Return

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

Where to file 2009 tax return 7. Where to file 2009 tax return   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. Where to file 2009 tax return Costs not included. Where to file 2009 tax return Intangible Drilling Costs Exploration CostsPartnerships and S corporations. Where to file 2009 tax return Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. Where to file 2009 tax return Film and Television Production Costs What's New Film and television productions costs. Where to file 2009 tax return  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. Where to file 2009 tax return See Film and Television Production Costs , later. Where to file 2009 tax return Introduction This chapter discusses costs you can elect to deduct or capitalize. Where to file 2009 tax return You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. Where to file 2009 tax return If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. Where to file 2009 tax return When you capitalize a cost, you add it to the basis of property to which it relates. Where to file 2009 tax return A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Where to file 2009 tax return Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. Where to file 2009 tax return You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. Where to file 2009 tax return For more information on the alternative minimum tax, see the instructions for the following forms. Where to file 2009 tax return Form 6251, Alternative Minimum Tax—Individuals. Where to file 2009 tax return Form 4626, Alternative Minimum Tax—Corporations. Where to file 2009 tax return Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. Where to file 2009 tax return Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Where to file 2009 tax return Certain carrying charges must be capitalized under the uniform capitalization rules. Where to file 2009 tax return (For information on capitalization of interest, see chapter 4 . Where to file 2009 tax return ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. Where to file 2009 tax return You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. Where to file 2009 tax return For unimproved and unproductive real property, your election is good for only 1 year. Where to file 2009 tax return You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. Where to file 2009 tax return For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. Where to file 2009 tax return For personal property, your election is effective until the date you install or first use it, whichever is later. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. Where to file 2009 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Attach the statement to the amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2” on the statement. Where to file 2009 tax return File the amended return at the same address you filed the original return. Where to file 2009 tax return Research and Experimental Costs The costs of research and experimentation are generally capital expenses. Where to file 2009 tax return However, you can elect to deduct these costs as a current business expense. Where to file 2009 tax return Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. Where to file 2009 tax return If you meet certain requirements, you may elect to defer and amortize research and experimental costs. Where to file 2009 tax return For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. Where to file 2009 tax return Research and experimental costs defined. Where to file 2009 tax return   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. Where to file 2009 tax return Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Where to file 2009 tax return Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. Where to file 2009 tax return      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. Where to file 2009 tax return However, costs paid or incurred to obtain another's patent are not research and experimental costs. Where to file 2009 tax return Product. Where to file 2009 tax return   The term “product” includes any of the following items. Where to file 2009 tax return Formula. Where to file 2009 tax return Invention. Where to file 2009 tax return Patent. Where to file 2009 tax return Pilot model. Where to file 2009 tax return Process. Where to file 2009 tax return Technique. Where to file 2009 tax return Property similar to the items listed above. Where to file 2009 tax return It also includes products used by you in your trade or business or held for sale, lease, or license. Where to file 2009 tax return Costs not included. Where to file 2009 tax return   Research and experimental costs do not include expenses for any of the following activities. Where to file 2009 tax return Advertising or promotions. Where to file 2009 tax return Consumer surveys. Where to file 2009 tax return Efficiency surveys. Where to file 2009 tax return Management studies. Where to file 2009 tax return Quality control testing. Where to file 2009 tax return Research in connection with literary, historical, or similar projects. Where to file 2009 tax return The acquisition of another's patent, model, production, or process. Where to file 2009 tax return When and how to elect. Where to file 2009 tax return   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. Where to file 2009 tax return If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. Where to file 2009 tax return Deducting or Amortizing Research and Experimentation Costs IF you . Where to file 2009 tax return . Where to file 2009 tax return . Where to file 2009 tax return THEN . Where to file 2009 tax return . Where to file 2009 tax return . Where to file 2009 tax return Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. Where to file 2009 tax return Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. Where to file 2009 tax return See Research and Experimental Costs in chapter 8. Where to file 2009 tax return Research credit. Where to file 2009 tax return   If you pay or incur qualified research expenses, you may be able to take the research credit. Where to file 2009 tax return For more information see Form 6765, Credit for Increasing Research Activities and its instructions. Where to file 2009 tax return Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. Where to file 2009 tax return You can usually recover them through depreciation or depletion. Where to file 2009 tax return However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. Where to file 2009 tax return These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. Where to file 2009 tax return You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. Where to file 2009 tax return You can elect to deduct only the costs of items with no salvage value. Where to file 2009 tax return These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. Where to file 2009 tax return Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. Where to file 2009 tax return However, see Amounts paid to contractor that must be capitalized , later. Where to file 2009 tax return You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. Where to file 2009 tax return It does not matter whether there is any intent to produce hydrocarbons. Where to file 2009 tax return If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. Where to file 2009 tax return Amounts paid to contractor that must be capitalized. Where to file 2009 tax return   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. Where to file 2009 tax return No formal statement is required. Where to file 2009 tax return If you file Schedule C (Form 1040), enter these costs under “Other expenses. Where to file 2009 tax return ”   For oil and gas wells, your election is binding for the year it is made and for all later years. Where to file 2009 tax return For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. Where to file 2009 tax return You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. Where to file 2009 tax return Energy credit for costs of geothermal wells. Where to file 2009 tax return   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. Where to file 2009 tax return See the Instructions for Form 3468 for more information. Where to file 2009 tax return Nonproductive well. Where to file 2009 tax return   If you capitalize your IDCs, you have another option if the well is nonproductive. Where to file 2009 tax return You can deduct the IDCs of the nonproductive well as an ordinary loss. Where to file 2009 tax return You must indicate and clearly state your election on your tax return for the year the well is completed. Where to file 2009 tax return Once made, the election for oil and gas wells is binding for all later years. Where to file 2009 tax return You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. Where to file 2009 tax return Costs incurred outside the United States. Where to file 2009 tax return   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. Where to file 2009 tax return However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. Where to file 2009 tax return If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. Where to file 2009 tax return These rules do not apply to a nonproductive well. Where to file 2009 tax return Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. Where to file 2009 tax return You recover these costs through depletion as the mineral is removed from the ground. Where to file 2009 tax return However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). Where to file 2009 tax return How to make the election. Where to file 2009 tax return   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. Where to file 2009 tax return Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. Where to file 2009 tax return The election applies to the tax year you make this election and all later tax years. Where to file 2009 tax return Partnerships and S corporations. Where to file 2009 tax return   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. Where to file 2009 tax return Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. Where to file 2009 tax return Reduced corporate deductions for exploration costs. Where to file 2009 tax return   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. Where to file 2009 tax return It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. Where to file 2009 tax return A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. Where to file 2009 tax return For more information on this method of amortization, see Internal Revenue Code section 59(e). Where to file 2009 tax return   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. Where to file 2009 tax return However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. Where to file 2009 tax return See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Where to file 2009 tax return   These rules also apply to the deduction of development costs by corporations. Where to file 2009 tax return See Development Costs , later. Where to file 2009 tax return Recapture of exploration expenses. Where to file 2009 tax return   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. Where to file 2009 tax return Use either of the following methods. Where to file 2009 tax return Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. Where to file 2009 tax return Your election must be clearly indicated on the return. Where to file 2009 tax return Increase your adjusted basis in the mine by the amount included in income. Where to file 2009 tax return Generally, you must elect this recapture method by the due date (including extensions) of your return. Where to file 2009 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Make the election on your amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2” on the form where you are including the income. Where to file 2009 tax return File the amended return at the same address you filed the original return. Where to file 2009 tax return Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Where to file 2009 tax return   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. Where to file 2009 tax return Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Where to file 2009 tax return   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. Where to file 2009 tax return Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. Where to file 2009 tax return If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. Where to file 2009 tax return Foreign exploration costs. Where to file 2009 tax return   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. Where to file 2009 tax return You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. Where to file 2009 tax return (Cost depletion is discussed in chapter 9 . Where to file 2009 tax return ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. Where to file 2009 tax return These rules also apply to foreign development costs. Where to file 2009 tax return Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. Where to file 2009 tax return These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. Where to file 2009 tax return Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. Where to file 2009 tax return Development costs do not include the costs for the acquisition or improvement of depreciable property. Where to file 2009 tax return Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. Where to file 2009 tax return This election applies each tax year to expenses paid or incurred in that year. Where to file 2009 tax return Once made, the election is binding for the year and cannot be revoked for any reason. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. Where to file 2009 tax return Generally, you must make the election by the due date of the return (including extensions). Where to file 2009 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2. Where to file 2009 tax return ” File the amended return at the same address you filed the original return. Where to file 2009 tax return Foreign development costs. Where to file 2009 tax return   The rules discussed earlier for foreign exploration costs apply to foreign development costs. Where to file 2009 tax return Reduced corporate deductions for development costs. Where to file 2009 tax return   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. Where to file 2009 tax return Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. Where to file 2009 tax return For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. Where to file 2009 tax return Circulation costs are deductible even if they normally would be capitalized. Where to file 2009 tax return This rule does not apply to the following costs that must be capitalized. Where to file 2009 tax return The purchase of land or depreciable property. Where to file 2009 tax return The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. Where to file 2009 tax return Other treatment of circulation costs. Where to file 2009 tax return   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. Where to file 2009 tax return Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). Where to file 2009 tax return Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. Where to file 2009 tax return Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. Where to file 2009 tax return Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. Where to file 2009 tax return However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. Where to file 2009 tax return The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Where to file 2009 tax return Any remaining costs must be amortized. Where to file 2009 tax return For information about amortizing start-up and organizational costs, see chapter 8 . Where to file 2009 tax return Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Where to file 2009 tax return Organizational costs include the costs of creating a corporation. Where to file 2009 tax return For more information on start-up and organizational costs, see chapter 8 . Where to file 2009 tax return How to make the election. Where to file 2009 tax return   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. Where to file 2009 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2. Where to file 2009 tax return ” File the amended return at the same address you filed the original return. Where to file 2009 tax return The election applies when computing taxable income for the current tax year and all subsequent years. Where to file 2009 tax return Reforestation Costs Reforestation costs are generally capital expenditures. Where to file 2009 tax return However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. Where to file 2009 tax return The remaining costs can be amortized over an 84-month period. Where to file 2009 tax return For information about amortizing reforestation costs, see chapter 8 . Where to file 2009 tax return Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Where to file 2009 tax return Qualified timber property is property that contains trees in significant commercial quantities. Where to file 2009 tax return See chapter 8 for more information on qualifying reforestation costs and qualified timber property. Where to file 2009 tax return If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. Where to file 2009 tax return Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. Where to file 2009 tax return If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. Where to file 2009 tax return If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. Where to file 2009 tax return The unique stand identification numbers. Where to file 2009 tax return The total number of acres reforested during the tax year. Where to file 2009 tax return The nature of the reforestation treatments. Where to file 2009 tax return The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. Where to file 2009 tax return   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2. Where to file 2009 tax return ” File the amended return at the same address you filed the original return. Where to file 2009 tax return The election applies when computing taxable income for the current tax year and all subsequent years. Where to file 2009 tax return   For additional information on reforestation costs, see chapter 8 . Where to file 2009 tax return Recapture. Where to file 2009 tax return   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. Where to file 2009 tax return For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. Where to file 2009 tax return Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. Where to file 2009 tax return However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. Where to file 2009 tax return Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. Where to file 2009 tax return However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. Where to file 2009 tax return You must own or lease the facility or vehicle for use in connection with your trade or business. Where to file 2009 tax return A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Where to file 2009 tax return A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). Where to file 2009 tax return You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. Where to file 2009 tax return Deduction limit. Where to file 2009 tax return   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. Where to file 2009 tax return However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. Where to file 2009 tax return Partners and partnerships. Where to file 2009 tax return   The $15,000 limit applies to a partnership and also to each partner in the partnership. Where to file 2009 tax return A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. Where to file 2009 tax return If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. Where to file 2009 tax return   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). Where to file 2009 tax return If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. Where to file 2009 tax return Example. Where to file 2009 tax return Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Where to file 2009 tax return Emilio had $12,000 of similar expenses in his sole proprietorship. Where to file 2009 tax return He elected to deduct $7,000 of them. Where to file 2009 tax return Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Where to file 2009 tax return Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Where to file 2009 tax return Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Where to file 2009 tax return Qualification standards. Where to file 2009 tax return   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. Where to file 2009 tax return You can view the Americans with Disabilities Act at www. Where to file 2009 tax return ada. Where to file 2009 tax return gov/pubs/ada. Where to file 2009 tax return htm. Where to file 2009 tax return   The following is a list of some architectural barrier removal costs that can be deducted. Where to file 2009 tax return Ground and floor surfaces. Where to file 2009 tax return Walks. Where to file 2009 tax return Parking lots. Where to file 2009 tax return Ramps. Where to file 2009 tax return Entrances. Where to file 2009 tax return Doors and doorways. Where to file 2009 tax return Stairs. Where to file 2009 tax return Floors. Where to file 2009 tax return Toilet rooms. Where to file 2009 tax return Water fountains. Where to file 2009 tax return Public telephones. Where to file 2009 tax return Elevators. Where to file 2009 tax return Controls. Where to file 2009 tax return Signage. Where to file 2009 tax return Alarms. Where to file 2009 tax return Protruding objects. Where to file 2009 tax return Symbols of accessibility. Where to file 2009 tax return You can find the ADA guidelines and requirements for architectural barrier removal at www. Where to file 2009 tax return usdoj. Where to file 2009 tax return gov/crt/ada/reg3a. Where to file 2009 tax return html. Where to file 2009 tax return   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. Where to file 2009 tax return You can find the guidelines and requirements for transportation barrier removal at www. Where to file 2009 tax return fta. Where to file 2009 tax return dot. Where to file 2009 tax return gov. Where to file 2009 tax return   Also, you can access the ADA website at www. Where to file 2009 tax return ada. Where to file 2009 tax return gov for additional information. Where to file 2009 tax return Other barrier removals. Where to file 2009 tax return   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. Where to file 2009 tax return The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. Where to file 2009 tax return The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). Where to file 2009 tax return The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. Where to file 2009 tax return How to make the election. Where to file 2009 tax return   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Where to file 2009 tax return Identify the deduction as a separate item. Where to file 2009 tax return The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. Where to file 2009 tax return If you make this election, you must maintain adequate records to support your deduction. Where to file 2009 tax return   For your election to be valid, you generally must file your return by its due date, including extensions. Where to file 2009 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Where to file 2009 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Where to file 2009 tax return 9100-2. Where to file 2009 tax return ” File the amended return at the same address you filed the original return. Where to file 2009 tax return Your election is irrevocable after the due date, including extensions, of your return. Where to file 2009 tax return Disabled access credit. Where to file 2009 tax return   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. Where to file 2009 tax return If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Where to file 2009 tax return   For more information, see Form 8826, Disabled Access Credit. Where to file 2009 tax return Film and Television Production Costs Film and television production costs are generally capital expenses. Where to file 2009 tax return However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. Where to file 2009 tax return For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. Where to file 2009 tax return Prev  Up  Next   Home   More Online Publications