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1040ez Form 2013 Instructions

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1040ez Form 2013 Instructions

1040ez form 2013 instructions Publication 531 - Main Content Table of Contents Keeping a Daily Tip RecordElectronic tip record. 1040ez form 2013 instructions Reporting Tips to Your EmployerElectronic tip statement. 1040ez form 2013 instructions Final report. 1040ez form 2013 instructions Tip Rate Determination and Education Program Reporting Tips on Your Tax Return Allocated Tips How To Get Tax Help Keeping a Daily Tip Record Why keep a daily tip record. 1040ez form 2013 instructions   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. 1040ez form 2013 instructions How to keep a daily tip record. 1040ez form 2013 instructions   There are two ways to keep a daily tip record. 1040ez form 2013 instructions You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. 1040ez form 2013 instructions You should keep your daily tip record with your tax or other personal records. 1040ez form 2013 instructions You must keep your records for as long as they are important for administration of the federal tax law. 1040ez form 2013 instructions For information on how long to keep records, see How Long to Keep Records in chapter 1 of Publication 17, Your Federal Income Tax. 1040ez form 2013 instructions    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. 1040ez form 2013 instructions To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. 1040ez form 2013 instructions Publication 1244 is also available at www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/pub1244. 1040ez form 2013 instructions Publication 1244 includes a 1-year supply of Form 4070A. 1040ez form 2013 instructions Each day, write in the information asked for on the form. 1040ez form 2013 instructions A filled-in Form 4070A is shown on the following page. 1040ez form 2013 instructions   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. 1040ez form 2013 instructions Although you do not report these tips to your employer, you must report them on your tax return. 1040ez form 2013 instructions   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). 1040ez form 2013 instructions Then, each workday, write the date and the following information. 1040ez form 2013 instructions Cash tips you get directly from customers or from other employees. 1040ez form 2013 instructions Tips from credit and debit card charge customers that your employer pays you. 1040ez form 2013 instructions The value of any noncash tips you get, such as tickets, passes, or other items of value. 1040ez form 2013 instructions The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. 1040ez form 2013 instructions Please click here for the text description of the image. 1040ez form 2013 instructions Sample Filled-in Form 4070A from Publication 1244 Electronic tip record. 1040ez form 2013 instructions   You can use an electronic system provided by your employer to record your daily tips. 1040ez form 2013 instructions If you do, you must receive and keep a paper copy of this record. 1040ez form 2013 instructions Service charges. 1040ez form 2013 instructions    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. 1040ez form 2013 instructions This is part of your wages, not a tip. 1040ez form 2013 instructions The following factors determine if you have a tip or service charge: The payment is made free from compulsion; The customer has the right to determine the amount of payment; The payment is not subject to negotiation or dictated by employer policy; and The customer generally has the right to determine who receives the payment. 1040ez form 2013 instructions See examples below. 1040ez form 2013 instructions Example 1. 1040ez form 2013 instructions Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. 1040ez form 2013 instructions Jane's bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. 1040ez form 2013 instructions Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. 1040ez form 2013 instructions Do not include the 18% charge in your tip diary. 1040ez form 2013 instructions Service charges that are paid to you are considered wages, not tips. 1040ez form 2013 instructions Example 2. 1040ez form 2013 instructions Good Food Restaurant includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. 1040ez form 2013 instructions David's bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of the charges for food and beverages at the bottom of the bill beneath the signature line. 1040ez form 2013 instructions Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. 1040ez form 2013 instructions Be sure to include this amount in your tip diary. 1040ez form 2013 instructions Sample Filled-in Form 4070 from Publication 1244 Please click here for the text description of the image. 1040ez form 2013 instructions Filled-in Form 4070 Reporting Tips to Your Employer Why report tips to your employer. 1040ez form 2013 instructions   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). 1040ez form 2013 instructions What tips to report. 1040ez form 2013 instructions   Report to your employer only cash, check, and debit and credit card tips you receive. 1040ez form 2013 instructions   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. 1040ez form 2013 instructions   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. 1040ez form 2013 instructions Do not report to your employer any portion of the tips you receive that you pass on to other employees. 1040ez form 2013 instructions However, you must report tips you receive from other employees. 1040ez form 2013 instructions   Do not report the value of any noncash tips, such as tickets or passes, to your employer. 1040ez form 2013 instructions You do not pay social security, Medicare, Additional Medicare, or railroad retirement taxes on these tips. 1040ez form 2013 instructions How to report. 1040ez form 2013 instructions   If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. 1040ez form 2013 instructions Fill in the information asked for on the form, sign and date the form, and give it to your employer. 1040ez form 2013 instructions A sample filled-in Form 4070 is shown above. 1040ez form 2013 instructions To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. 1040ez form 2013 instructions   If you do not use Form 4070, give your employer a statement with the following information. 1040ez form 2013 instructions Your name, address, and social security number. 1040ez form 2013 instructions Your employer's name, address, and business name (if it is different from your employer's name). 1040ez form 2013 instructions The month (or the dates of any shorter period) in which you received tips. 1040ez form 2013 instructions The total tips required to be reported for that period. 1040ez form 2013 instructions You must sign and date the statement. 1040ez form 2013 instructions Be sure to keep a copy with your tax or other personal records. 1040ez form 2013 instructions   Your employer may require you to report your tips more than once a month. 1040ez form 2013 instructions However, the statement cannot cover a period of more than 1 calendar month. 1040ez form 2013 instructions Electronic tip statement. 1040ez form 2013 instructions   Your employer can have you furnish your tip statements electronically. 1040ez form 2013 instructions When to report. 1040ez form 2013 instructions   Give your report for each month to your employer by the 10th of the next month. 1040ez form 2013 instructions If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. 1040ez form 2013 instructions Example. 1040ez form 2013 instructions You must report your tips received in September 2014 by October 10, 2014. 1040ez form 2013 instructions Final report. 1040ez form 2013 instructions   If your employment ends during the month, you can report your tips when your employment ends. 1040ez form 2013 instructions Penalty for not reporting tips. 1040ez form 2013 instructions   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips. 1040ez form 2013 instructions (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. 1040ez form 2013 instructions ) The penalty amount is in addition to the taxes you owe. 1040ez form 2013 instructions   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. 1040ez form 2013 instructions To do so, attach a statement to your return explaining why you did not report them. 1040ez form 2013 instructions Giving your employer money for taxes. 1040ez form 2013 instructions   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. 1040ez form 2013 instructions If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. 1040ez form 2013 instructions   If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order. 1040ez form 2013 instructions All taxes on your regular pay. 1040ez form 2013 instructions Social security, Medicare, Additional Medicare, or railroad retirement taxes on your reported tips. 1040ez form 2013 instructions Federal, state, and local income taxes on your reported tips. 1040ez form 2013 instructions    Any taxes that remain unpaid can be collected by your employer from your next paycheck. 1040ez form 2013 instructions If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. 1040ez form 2013 instructions See Publication 505, Tax Withholding and Estimated Tax, for more information. 1040ez form 2013 instructions    Uncollected taxes. 1040ez form 2013 instructions You must report on your tax return any social security and Medicare taxes, or railroad retirement taxes that remained uncollected at the end of 2013. 1040ez form 2013 instructions These uncollected taxes will be shown on your 2013 Form W-2. 1040ez form 2013 instructions See Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. 1040ez form 2013 instructions Tip Rate Determination and Education Program Your employer may participate in the Tip Rate Determination and Education Program. 1040ez form 2013 instructions The program was developed to help employees and employers understand and meet their tip reporting responsibilities. 1040ez form 2013 instructions There are two agreements under the program: the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). 1040ez form 2013 instructions A variation of the TRAC program, the Employer Tip Reporting Alternative Commitment, (EmTRAC) was designed to allow employers in the food and beverage industry to design and receive approval for their own TRAC programs. 1040ez form 2013 instructions For information on the EmTRAC program, see Notice 2001-1, which is on page 261 of Internal Revenue Bulletin 2001-2 at www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/pub/irs-irbs/irb01-02. 1040ez form 2013 instructions pdf. 1040ez form 2013 instructions If you are employed in the gaming industry, your employer may participate in the Gaming Industry Tip Compliance Agreement Program. 1040ez form 2013 instructions See Revenue Procedure 2007-32, 2007-22 I. 1040ez form 2013 instructions R. 1040ez form 2013 instructions B. 1040ez form 2013 instructions 1322, available at www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/pub/irs-irbs/irb07_22. 1040ez form 2013 instructions pdf. 1040ez form 2013 instructions Your employer can provide you with a copy of any applicable agreement. 1040ez form 2013 instructions To find out more about these agreements, visit IRS. 1040ez form 2013 instructions gov and enter “restaurant tip reporting” in the search box. 1040ez form 2013 instructions You may also call 1-800-829-4933, visit www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/localcontacts for the IRS Taxpayer Assistance Center in your area, or send an email to Tip. 1040ez form 2013 instructions Program@irs. 1040ez form 2013 instructions gov and request information on this program. 1040ez form 2013 instructions Reporting Tips on Your Tax Return How to report tips. 1040ez form 2013 instructions   Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; Form 1040EZ, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. 1040ez form 2013 instructions What tips to report. 1040ez form 2013 instructions   Generally, you must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. 1040ez form 2013 instructions Any tips you reported to your employer as required in 2013 are included in the wages shown in box 1 of your Form W-2. 1040ez form 2013 instructions Add to the amount in box 1 only the tips you did not report to your employer. 1040ez form 2013 instructions   However, any tips you received in 2013 that you reported to your employer as required after 2013 but before January 11, 2014, are not included in the wages shown in box 1 of your 2013 Form W-2. 1040ez form 2013 instructions Do not include the amount of these tips on your 2013 tax return. 1040ez form 2013 instructions Instead, include them on your 2014 tax return. 1040ez form 2013 instructions Tips you received in 2012 that you reported to your employer as required after 2012 but before January 11, 2013, are included in the wages shown in box 1 of your 2013 Form W-2. 1040ez form 2013 instructions Although these tips were received in 2012, you must report them on your 2013 tax return. 1040ez form 2013 instructions   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. 1040ez form 2013 instructions Do not report on your income tax return any portion of the tips you receive that you pass on to other employees. 1040ez form 2013 instructions However, you must report tips you receive from other employees. 1040ez form 2013 instructions    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. 1040ez form 2013 instructions    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. 1040ez form 2013 instructions   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. 1040ez form 2013 instructions Cash and charge tips you received that totaled less than $20 for any month. 1040ez form 2013 instructions The value of noncash tips, such as tickets, passes, or other items of value. 1040ez form 2013 instructions Example. 1040ez form 2013 instructions Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. 1040ez form 2013 instructions Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. 1040ez form 2013 instructions He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. 1040ez form 2013 instructions Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages + $7,000 reported tips) in box 1. 1040ez form 2013 instructions He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. 1040ez form 2013 instructions Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. 1040ez form 2013 instructions    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. 1040ez form 2013 instructions To report these taxes, you must file a return even if you would not otherwise have to file. 1040ez form 2013 instructions You must use Form 1040, Form 1040NR, Form 1040NR-EZ, Form 1040-SS, or 1040-PR (as appropriate) for this purpose. 1040ez form 2013 instructions (You cannot file Form 1040EZ or Form 1040A. 1040ez form 2013 instructions )    Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure social security and Medicare taxes. 1040ez form 2013 instructions Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. 1040ez form 2013 instructions Use Form 8959 to figure Additional Medicare Tax. 1040ez form 2013 instructions If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. 1040ez form 2013 instructions To get railroad retirement credit, you must report tips to your employer. 1040ez form 2013 instructions Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. 1040ez form 2013 instructions    You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. 1040ez form 2013 instructions For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. 1040ez form 2013 instructions   If your employer could not collect all the social security and Medicare taxes, or railroad retirement taxes you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). 1040ez form 2013 instructions You must report these amounts as additional tax on your return. 1040ez form 2013 instructions   If you worked in the U. 1040ez form 2013 instructions S. 1040ez form 2013 instructions possessions and received Form W-2AS, Form W-2CM, Form W-2GU, or Form W-2VI, any uncollected taxes on tips will be shown in box 12 with codes A and B. 1040ez form 2013 instructions If you received Form 499R-2/W-2PR, any uncollected taxes will be shown in boxes 22 and 23. 1040ez form 2013 instructions Unlike the uncollected portion of the regular (1. 1040ez form 2013 instructions 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported on Form W-2. 1040ez form 2013 instructions   To report these uncollected taxes, you must file a return even if you would not otherwise have to file. 1040ez form 2013 instructions You can report these taxes on Form 1040, in the space next to line 60; Form 1040NR, line 59; Form 1040-SS, Part I, line 6; or Form 1040-PR, Part I, line 6. 1040ez form 2013 instructions See the instructions for the appropriate form and line number indicated, and Form 8959. 1040ez form 2013 instructions (You cannot file Form 1040A, Form 1040EZ, or Form 1040NR-EZ. 1040ez form 2013 instructions ) Self-employed persons. 1040ez form 2013 instructions    If you receive tips as a self-employed person, you should report these tips as income on Schedule C or C-EZ. 1040ez form 2013 instructions See Publication 334, Tax Guide for Small Business, for more information on reporting business income. 1040ez form 2013 instructions Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. 1040ez form 2013 instructions They are not included in box 1 with your wages and reported tips. 1040ez form 2013 instructions If box 8 is blank, this discussion does not apply to you. 1040ez form 2013 instructions What are allocated tips. 1040ez form 2013 instructions   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. 1040ez form 2013 instructions Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. 1040ez form 2013 instructions No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips. 1040ez form 2013 instructions How were your allocated tips figured. 1040ez form 2013 instructions   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). 1040ez form 2013 instructions Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. 1040ez form 2013 instructions For information about the exact allocation method used, ask your employer. 1040ez form 2013 instructions Must you report your allocated tips on your tax return. 1040ez form 2013 instructions   You must report tips you received in 2013 (including both cash and noncash tips) on your tax return as explained in What tips to report , earlier. 1040ez form 2013 instructions Any tips you reported to your employer in 2013 as required (explained under Reporting Tips to Your Employer , earlier) are included in the wages shown in box 1 of your Form W-2. 1040ez form 2013 instructions Add to the amount in box 1 only the tips you did not report to your employer as required. 1040ez form 2013 instructions This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated amount. 1040ez form 2013 instructions   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. 1040ez form 2013 instructions How to report allocated tips. 1040ez form 2013 instructions   If you received any tips in 2013 that you did not report to your employer as required (including allocated tips that you are required to report on your tax return), add these tips to the amount in box 1 of your Form(s) W-2 and report this amount as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. 1040ez form 2013 instructions (You cannot file Form 1040A or Form 1040EZ). 1040ez form 2013 instructions    Because social security, Medicare, or Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. 1040ez form 2013 instructions Complete Form 4137 and include the allocated tips on line 1 of the form as provided in its instructions. 1040ez form 2013 instructions See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. 1040ez form 2013 instructions How to request an approved lower rate. 1040ez form 2013 instructions   Your employer can use a tip rate lower than 8% (but not lower than 2%) to figure allocated tips only if the IRS approves the lower rate. 1040ez form 2013 instructions Either the employer or the employees can request approval of a lower rate by filing a petition with the IRS. 1040ez form 2013 instructions The petition must include specific information about the establishment that will justify the lower rate. 1040ez form 2013 instructions A user fee must be paid with the petition. 1040ez form 2013 instructions    An employee petition can be filed only with the consent of a majority of the directly tipped employees (waiters, bartenders, and others who receive tips directly from customers). 1040ez form 2013 instructions The petition must state the total number of directly tipped employees and the number of employees consenting to the petition. 1040ez form 2013 instructions Employees filing the petition must promptly notify the employer, and the employer must promptly give the IRS a copy of all Forms 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, filed for the establishment for the previous 3 years. 1040ez form 2013 instructions   For more information about how to file a petition and what information to include, see Allocation of Tips in the Instructions for Form 8027. 1040ez form 2013 instructions How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. 1040ez form 2013 instructions Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. 1040ez form 2013 instructions Free help with your tax return. 1040ez form 2013 instructions   Free help in preparing your return is available nationwide from IRS-certified volunteers. 1040ez form 2013 instructions The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. 1040ez form 2013 instructions The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 1040ez form 2013 instructions Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 1040ez form 2013 instructions Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. 1040ez form 2013 instructions To find the nearest VITA or TCE site, visit IRS. 1040ez form 2013 instructions gov or call 1-800-906-9887. 1040ez form 2013 instructions   As part of the TCE program, AARP offers the Tax-Aide counseling program. 1040ez form 2013 instructions To find the nearest AARP Tax-Aide site, visit AARP's website at www. 1040ez form 2013 instructions aarp. 1040ez form 2013 instructions org/money/taxaide or call 1-888-227-7669. 1040ez form 2013 instructions   For more information on these programs, go to IRS. 1040ez form 2013 instructions gov and enter “VITA” in the search box. 1040ez form 2013 instructions Internet. 1040ez form 2013 instructions IRS. 1040ez form 2013 instructions gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. 1040ez form 2013 instructions Apply for an Employer Identification Number (EIN). 1040ez form 2013 instructions Go to IRS. 1040ez form 2013 instructions gov and enter Apply for an EIN in the search box. 1040ez form 2013 instructions Request an Electronic Filing PIN by going to IRS. 1040ez form 2013 instructions gov and entering Electronic Filing PIN in the search box. 1040ez form 2013 instructions Check the status of your 2013 refund with Where's My Refund? Go to IRS. 1040ez form 2013 instructions gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040ez form 2013 instructions If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040ez form 2013 instructions Check the status of your amended return. 1040ez form 2013 instructions Go to IRS. 1040ez form 2013 instructions gov and enter Where's My Amended Return in the search box. 1040ez form 2013 instructions Download forms, instructions, and publications, including some accessible versions. 1040ez form 2013 instructions Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. 1040ez form 2013 instructions gov or IRS2Go. 1040ez form 2013 instructions Tax return and tax account transcripts are generally available for the current year and past three years. 1040ez form 2013 instructions Figure your income tax withholding with the IRS Withholding Calculator on IRS. 1040ez form 2013 instructions gov. 1040ez form 2013 instructions Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 1040ez form 2013 instructions Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 1040ez form 2013 instructions gov. 1040ez form 2013 instructions Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. 1040ez form 2013 instructions gov or IRS2Go. 1040ez form 2013 instructions Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. 1040ez form 2013 instructions An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. 1040ez form 2013 instructions Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. 1040ez form 2013 instructions If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. 1040ez form 2013 instructions Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 1040ez form 2013 instructions Locate the nearest volunteer help site with the VITA Locator Tool on IRS. 1040ez form 2013 instructions gov. 1040ez form 2013 instructions Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040ez form 2013 instructions The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040ez form 2013 instructions Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. 1040ez form 2013 instructions AARP offers the Tax-Aide counseling program as part of the TCE program. 1040ez form 2013 instructions Visit AARP's website to find the nearest Tax-Aide location. 1040ez form 2013 instructions Research your tax questions. 1040ez form 2013 instructions Search publications and instructions by topic or keyword. 1040ez form 2013 instructions Read the Internal Revenue Code, regulations, or other official guidance. 1040ez form 2013 instructions Read Internal Revenue Bulletins. 1040ez form 2013 instructions Sign up to receive local and national tax news by email. 1040ez form 2013 instructions Phone. 1040ez form 2013 instructions You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 1040ez form 2013 instructions Download the free IRS2Go mobile app from the iTunes app store or from Google Play. 1040ez form 2013 instructions Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 1040ez form 2013 instructions Call to locate the nearest volunteer help site, 1-800-906-9887. 1040ez form 2013 instructions Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040ez form 2013 instructions The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040ez form 2013 instructions Most VITA and TCE sites offer free electronic filing. 1040ez form 2013 instructions Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 1040ez form 2013 instructions Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 1040ez form 2013 instructions Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. 1040ez form 2013 instructions The automated Where's My Refund? information is available 24 hours a day, 7 days a week. 1040ez form 2013 instructions If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040ez form 2013 instructions Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 1040ez form 2013 instructions Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040ez form 2013 instructions Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. 1040ez form 2013 instructions Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 1040ez form 2013 instructions Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). 1040ez form 2013 instructions You should receive your order within 10 business days. 1040ez form 2013 instructions Call to order transcripts of your tax returns or tax account, 1-800-908-9946. 1040ez form 2013 instructions Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. 1040ez form 2013 instructions Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. 1040ez form 2013 instructions Call to ask tax questions, 1-800-829-1040. 1040ez form 2013 instructions Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 1040ez form 2013 instructions The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 1040ez form 2013 instructions These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. 1040ez form 2013 instructions gsa. 1040ez form 2013 instructions gov/fedrelay. 1040ez form 2013 instructions Walk-in. 1040ez form 2013 instructions You can find a selection of forms, publications and services — in-person, face-to-face. 1040ez form 2013 instructions Products. 1040ez form 2013 instructions You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 1040ez form 2013 instructions Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 1040ez form 2013 instructions Services. 1040ez form 2013 instructions You can walk in to your local TAC most business days for personal, face-to-face tax help. 1040ez form 2013 instructions An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 1040ez form 2013 instructions If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. 1040ez form 2013 instructions No appointment is necessary—just walk in. 1040ez form 2013 instructions Before visiting, check www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/localcontacts for hours of operation and services provided. 1040ez form 2013 instructions Mail. 1040ez form 2013 instructions You can send your order for forms, instructions, and publications to the address below. 1040ez form 2013 instructions You should receive a response within 10 business days after your request is received. 1040ez form 2013 instructions  Internal Revenue Service 1201 N. 1040ez form 2013 instructions Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. 1040ez form 2013 instructions   The Taxpayer Advocate Service (TAS) is your voice at the IRS. 1040ez form 2013 instructions Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 1040ez form 2013 instructions What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. 1040ez form 2013 instructions We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 1040ez form 2013 instructions You face (or your business is facing) an immediate threat of adverse action. 1040ez form 2013 instructions You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 1040ez form 2013 instructions   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 1040ez form 2013 instructions Here's why we can help: TAS is an independent organization within the IRS. 1040ez form 2013 instructions Our advocates know how to work with the IRS. 1040ez form 2013 instructions Our services are free and tailored to meet your needs. 1040ez form 2013 instructions We have offices in every state, the District of Columbia, and Puerto Rico. 1040ez form 2013 instructions How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/advocate, or call us toll-free at 1-877-777-4778. 1040ez form 2013 instructions How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 1040ez form 2013 instructions If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov/sams. 1040ez form 2013 instructions Low Income Taxpayer Clinics. 1040ez form 2013 instructions   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. 1040ez form 2013 instructions Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 1040ez form 2013 instructions Visit www. 1040ez form 2013 instructions TaxpayerAdvocate. 1040ez form 2013 instructions irs. 1040ez form 2013 instructions gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. 1040ez form 2013 instructions Prev  Up  Next   Home   More Online Publications
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General Filing Questions

Do I Need to File a Tax Return?
Determine if you are required to file a Federal tax return or should file to get a refund.

How Much Can I Deduct for Each Exemption I Claim?
Determine the dollar amount for each exemption you are eligible to claim.

What is My Filing Status?
Determine your filing status: Single, Head of Household, Married Filing Jointly, Married Filing Separately or Qualifying Widow(er) with Dependent Child.

Who Can I Claim as a Dependent?
Determine who you may claim as a dependent.

What is the simplest form to use to file my taxes?
Determine the simplest Form 1040 series Tax Return you can file.

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Page Last Reviewed or Updated: 14-Feb-2014

The 1040ez Form 2013 Instructions

1040ez form 2013 instructions 2. 1040ez form 2013 instructions   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. 1040ez form 2013 instructions Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. 1040ez form 2013 instructions Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). 1040ez form 2013 instructions You must do this to figure your net capital gain or loss. 1040ez form 2013 instructions For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. 1040ez form 2013 instructions See Capital Gains Tax Rates in chapter 4. 1040ez form 2013 instructions Your deduction for a net capital loss may be limited. 1040ez form 2013 instructions See Treatment of Capital Losses in chapter 4. 1040ez form 2013 instructions Capital gain or loss. 1040ez form 2013 instructions   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. 1040ez form 2013 instructions You also may have a capital gain if your section 1231 transactions result in a net gain. 1040ez form 2013 instructions Section 1231 transactions. 1040ez form 2013 instructions   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. 1040ez form 2013 instructions They also include certain involuntary conversions of business or investment property, including capital assets. 1040ez form 2013 instructions See Section 1231 Gains and Losses in chapter 3 for more information. 1040ez form 2013 instructions Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. 1040ez form 2013 instructions Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. 1040ez form 2013 instructions For exceptions, see Noncapital Assets, later. 1040ez form 2013 instructions The following items are examples of capital assets. 1040ez form 2013 instructions Stocks and bonds. 1040ez form 2013 instructions A home owned and occupied by you and your family. 1040ez form 2013 instructions Timber grown on your home property or investment property, even if you make casual sales of the timber. 1040ez form 2013 instructions Household furnishings. 1040ez form 2013 instructions A car used for pleasure or commuting. 1040ez form 2013 instructions Coin or stamp collections. 1040ez form 2013 instructions Gems and jewelry. 1040ez form 2013 instructions Gold, silver, and other metals. 1040ez form 2013 instructions Personal-use property. 1040ez form 2013 instructions   Generally, property held for personal use is a capital asset. 1040ez form 2013 instructions Gain from a sale or exchange of that property is a capital gain. 1040ez form 2013 instructions Loss from the sale or exchange of that property is not deductible. 1040ez form 2013 instructions You can deduct a loss relating to personal-use property only if it results from a casualty or theft. 1040ez form 2013 instructions Investment property. 1040ez form 2013 instructions   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. 1040ez form 2013 instructions This treatment does not apply to property used to produce rental income. 1040ez form 2013 instructions See Business assets, later, under Noncapital Assets. 1040ez form 2013 instructions Release of restriction on land. 1040ez form 2013 instructions   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. 1040ez form 2013 instructions Noncapital Assets A noncapital asset is property that is not a capital asset. 1040ez form 2013 instructions The following kinds of property are not capital assets. 1040ez form 2013 instructions Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. 1040ez form 2013 instructions Inventories are discussed in Publication 538, Accounting Periods and Methods. 1040ez form 2013 instructions But, see the Tip below. 1040ez form 2013 instructions Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. 1040ez form 2013 instructions Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). 1040ez form 2013 instructions Sales of this type of property are discussed in chapter 3. 1040ez form 2013 instructions Real property used in your trade or business or as rental property, even if the property is fully depreciated. 1040ez form 2013 instructions A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. 1040ez form 2013 instructions But, see the Tip below. 1040ez form 2013 instructions U. 1040ez form 2013 instructions S. 1040ez form 2013 instructions Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. 1040ez form 2013 instructions Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. 1040ez form 2013 instructions It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. 1040ez form 2013 instructions The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. 1040ez form 2013 instructions Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. 1040ez form 2013 instructions Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 1040ez form 2013 instructions You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. 1040ez form 2013 instructions See chapter 4 of Publication 550 for details. 1040ez form 2013 instructions Property held mainly for sale to customers. 1040ez form 2013 instructions   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. 1040ez form 2013 instructions Inventories are discussed in Publication 538. 1040ez form 2013 instructions Business assets. 1040ez form 2013 instructions   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. 1040ez form 2013 instructions The sale or disposition of business property is discussed in chapter 3. 1040ez form 2013 instructions Letters and memoranda. 1040ez form 2013 instructions   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. 1040ez form 2013 instructions Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. 1040ez form 2013 instructions For this purpose, letters and memoranda addressed to you are considered prepared for you. 1040ez form 2013 instructions If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. 1040ez form 2013 instructions Commodities derivative financial instrument. 1040ez form 2013 instructions   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). 1040ez form 2013 instructions Commodities derivative dealer. 1040ez form 2013 instructions   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. 1040ez form 2013 instructions Hedging transaction. 1040ez form 2013 instructions   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. 1040ez form 2013 instructions Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. 1040ez form 2013 instructions Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. 1040ez form 2013 instructions Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. 1040ez form 2013 instructions If these rules apply, gains may be treated as ordinary income and losses may not be deductible. 1040ez form 2013 instructions See Transfers to Spouse in chapter 1 for rules that apply to spouses. 1040ez form 2013 instructions Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. 1040ez form 2013 instructions It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. 1040ez form 2013 instructions Depreciable property transaction. 1040ez form 2013 instructions   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. 1040ez form 2013 instructions A person and the person's controlled entity or entities. 1040ez form 2013 instructions A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. 1040ez form 2013 instructions An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). 1040ez form 2013 instructions An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). 1040ez form 2013 instructions Controlled entity. 1040ez form 2013 instructions   A person's controlled entity is either of the following. 1040ez form 2013 instructions A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. 1040ez form 2013 instructions An entity whose relationship with that person is one of the following. 1040ez form 2013 instructions A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 1040ez form 2013 instructions Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. 1040ez form 2013 instructions Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040ez form 2013 instructions Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040ez form 2013 instructions Controlled partnership transaction. 1040ez form 2013 instructions   A gain recognized in a controlled partnership transaction may be ordinary income. 1040ez form 2013 instructions The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. 1040ez form 2013 instructions   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. 1040ez form 2013 instructions A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 1040ez form 2013 instructions Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 1040ez form 2013 instructions Determining ownership. 1040ez form 2013 instructions   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. 1040ez form 2013 instructions Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 1040ez form 2013 instructions (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 1040ez form 2013 instructions ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 1040ez form 2013 instructions Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 1040ez form 2013 instructions For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 1040ez form 2013 instructions But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. 1040ez form 2013 instructions Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. 1040ez form 2013 instructions This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. 1040ez form 2013 instructions For the list of related persons, see Related persons next. 1040ez form 2013 instructions If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. 1040ez form 2013 instructions The gain on each item is taxable. 1040ez form 2013 instructions The loss on any item is nondeductible. 1040ez form 2013 instructions Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. 1040ez form 2013 instructions Related persons. 1040ez form 2013 instructions   The following is a list of related persons. 1040ez form 2013 instructions Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 1040ez form 2013 instructions ), and lineal descendants (children, grandchildren, etc. 1040ez form 2013 instructions ). 1040ez form 2013 instructions An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 1040ez form 2013 instructions Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. 1040ez form 2013 instructions A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 1040ez form 2013 instructions A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 1040ez form 2013 instructions Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 1040ez form 2013 instructions A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. 1040ez form 2013 instructions A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 1040ez form 2013 instructions Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040ez form 2013 instructions Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040ez form 2013 instructions An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. 1040ez form 2013 instructions Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 1040ez form 2013 instructions A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 1040ez form 2013 instructions Partnership interests. 1040ez form 2013 instructions   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. 1040ez form 2013 instructions Controlled groups. 1040ez form 2013 instructions   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. 1040ez form 2013 instructions   For more information, see section 267(f) of the Internal Revenue Code. 1040ez form 2013 instructions Ownership of stock or partnership interests. 1040ez form 2013 instructions   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. 1040ez form 2013 instructions Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 1040ez form 2013 instructions (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 1040ez form 2013 instructions ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 1040ez form 2013 instructions Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 1040ez form 2013 instructions An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 1040ez form 2013 instructions For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 1040ez form 2013 instructions But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. 1040ez form 2013 instructions Indirect transactions. 1040ez form 2013 instructions   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. 1040ez form 2013 instructions This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. 1040ez form 2013 instructions Property received from a related person. 1040ez form 2013 instructions   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. 1040ez form 2013 instructions This rule applies only to the original transferee. 1040ez form 2013 instructions Example 1. 1040ez form 2013 instructions Your brother sold stock to you for $7,600. 1040ez form 2013 instructions His cost basis was $10,000. 1040ez form 2013 instructions His loss of $2,400 was not deductible. 1040ez form 2013 instructions You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). 1040ez form 2013 instructions Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. 1040ez form 2013 instructions Example 2. 1040ez form 2013 instructions Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. 1040ez form 2013 instructions Your recognized loss is only $700 ($7,600 − $6,900). 1040ez form 2013 instructions You cannot deduct the loss not allowed to your brother. 1040ez form 2013 instructions Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. 1040ez form 2013 instructions Sale of a Business The sale of a business usually is not a sale of one asset. 1040ez form 2013 instructions Instead, all the assets of the business are sold. 1040ez form 2013 instructions Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. 1040ez form 2013 instructions A business usually has many assets. 1040ez form 2013 instructions When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. 1040ez form 2013 instructions The gain or loss on each asset is figured separately. 1040ez form 2013 instructions The sale of capital assets results in capital gain or loss. 1040ez form 2013 instructions The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). 1040ez form 2013 instructions The sale of inventory results in ordinary income or loss. 1040ez form 2013 instructions Partnership interests. 1040ez form 2013 instructions   An interest in a partnership or joint venture is treated as a capital asset when sold. 1040ez form 2013 instructions The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. 1040ez form 2013 instructions For more information, see Disposition of Partner's Interest in Publication 541. 1040ez form 2013 instructions Corporation interests. 1040ez form 2013 instructions   Your interest in a corporation is represented by stock certificates. 1040ez form 2013 instructions When you sell these certificates, you usually realize capital gain or loss. 1040ez form 2013 instructions For information on the sale of stock, see chapter 4 in Publication 550. 1040ez form 2013 instructions Corporate liquidations. 1040ez form 2013 instructions   Corporate liquidations of property generally are treated as a sale or exchange. 1040ez form 2013 instructions Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. 1040ez form 2013 instructions Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. 1040ez form 2013 instructions   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. 1040ez form 2013 instructions For more information, see section 332 of the Internal Revenue Code and the related regulations. 1040ez form 2013 instructions Allocation of consideration paid for a business. 1040ez form 2013 instructions   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. 1040ez form 2013 instructions Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. 1040ez form 2013 instructions This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. 1040ez form 2013 instructions It also determines the buyer's basis in the business assets. 1040ez form 2013 instructions Consideration. 1040ez form 2013 instructions   The buyer's consideration is the cost of the assets acquired. 1040ez form 2013 instructions The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. 1040ez form 2013 instructions Residual method. 1040ez form 2013 instructions   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. 1040ez form 2013 instructions This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. 1040ez form 2013 instructions Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. 1040ez form 2013 instructions   A group of assets constitutes a trade or business if either of the following applies. 1040ez form 2013 instructions Goodwill or going concern value could, under any circumstances, attach to them. 1040ez form 2013 instructions The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. 1040ez form 2013 instructions   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). 1040ez form 2013 instructions The consideration remaining after this reduction must be allocated among the various business assets in a certain order. 1040ez form 2013 instructions See Classes of assets next for the complete order. 1040ez form 2013 instructions Classes of assets. 1040ez form 2013 instructions   The following definitions are the classifications for deemed or actual asset acquisitions. 1040ez form 2013 instructions Allocate the consideration among the assets in the following order. 1040ez form 2013 instructions The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. 1040ez form 2013 instructions The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. 1040ez form 2013 instructions Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). 1040ez form 2013 instructions Class II assets are certificates of deposit, U. 1040ez form 2013 instructions S. 1040ez form 2013 instructions Government securities, foreign currency, and actively traded personal property, including stock and securities. 1040ez form 2013 instructions Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. 1040ez form 2013 instructions However, see section 1. 1040ez form 2013 instructions 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. 1040ez form 2013 instructions Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. 1040ez form 2013 instructions Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. 1040ez form 2013 instructions    Note. 1040ez form 2013 instructions Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. 1040ez form 2013 instructions Class VI assets are section 197 intangibles (other than goodwill and going concern value). 1040ez form 2013 instructions Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). 1040ez form 2013 instructions   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. 1040ez form 2013 instructions For example, if an asset is described in both Class II and Class IV, choose Class II. 1040ez form 2013 instructions Example. 1040ez form 2013 instructions The total paid in the sale of the assets of Company SKB is $21,000. 1040ez form 2013 instructions No cash or deposit accounts or similar accounts were sold. 1040ez form 2013 instructions The company's U. 1040ez form 2013 instructions S. 1040ez form 2013 instructions Government securities sold had a fair market value of $3,200. 1040ez form 2013 instructions The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. 1040ez form 2013 instructions Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. 1040ez form 2013 instructions S. 1040ez form 2013 instructions Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. 1040ez form 2013 instructions Agreement. 1040ez form 2013 instructions   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. 1040ez form 2013 instructions This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. 1040ez form 2013 instructions Reporting requirement. 1040ez form 2013 instructions   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. 1040ez form 2013 instructions Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 1040ez form 2013 instructions Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 1040ez form 2013 instructions See the Instructions for Form 8594. 1040ez form 2013 instructions Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. 1040ez form 2013 instructions It includes such items as patents, copyrights, and the goodwill value of a business. 1040ez form 2013 instructions Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. 1040ez form 2013 instructions The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. 1040ez form 2013 instructions See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. 1040ez form 2013 instructions Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. 1040ez form 2013 instructions The following discussions explain special rules that apply to certain dispositions of intangible property. 1040ez form 2013 instructions Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. 1040ez form 2013 instructions They include the following assets. 1040ez form 2013 instructions Goodwill. 1040ez form 2013 instructions Going concern value. 1040ez form 2013 instructions Workforce in place. 1040ez form 2013 instructions Business books and records, operating systems, and other information bases. 1040ez form 2013 instructions Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. 1040ez form 2013 instructions Customer-based intangibles. 1040ez form 2013 instructions Supplier-based intangibles. 1040ez form 2013 instructions Licenses, permits, and other rights granted by a governmental unit. 1040ez form 2013 instructions Covenants not to compete entered into in connection with the acquisition of a business. 1040ez form 2013 instructions Franchises, trademarks, and trade names. 1040ez form 2013 instructions See chapter 8 of Publication 535 for a description of each intangible. 1040ez form 2013 instructions Dispositions. 1040ez form 2013 instructions   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. 1040ez form 2013 instructions Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. 1040ez form 2013 instructions If you retain more than one section 197 intangible, increase each intangible's adjusted basis. 1040ez form 2013 instructions Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. 1040ez form 2013 instructions   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. 1040ez form 2013 instructions For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. 1040ez form 2013 instructions Covenant not to compete. 1040ez form 2013 instructions   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. 1040ez form 2013 instructions Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. 1040ez form 2013 instructions Anti-churning rules. 1040ez form 2013 instructions   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. 1040ez form 2013 instructions However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. 1040ez form 2013 instructions Recognize gain on the transfer of the property. 1040ez form 2013 instructions Pay income tax on the gain at the highest tax rate. 1040ez form 2013 instructions   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. 1040ez form 2013 instructions But each partner or shareholder must pay the tax on his or her share of gain. 1040ez form 2013 instructions   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. 1040ez form 2013 instructions You must file the tax return by the due date (including extensions). 1040ez form 2013 instructions You must also notify the transferee of the election in writing by the due date of the return. 1040ez form 2013 instructions   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). 1040ez form 2013 instructions Attach the statement to the amended return and write “Filed pursuant to section 301. 1040ez form 2013 instructions 9100-2” at the top of the statement. 1040ez form 2013 instructions File the amended return at the same address the original return was filed. 1040ez form 2013 instructions For more information about making the election, see Regulations section 1. 1040ez form 2013 instructions 197-2(h)(9). 1040ez form 2013 instructions For information about reporting the tax on your income tax return, see the Instructions for Form 4797. 1040ez form 2013 instructions Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. 1040ez form 2013 instructions This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. 1040ez form 2013 instructions For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. 1040ez form 2013 instructions This treatment applies to your transfer of a patent if you meet all the following conditions. 1040ez form 2013 instructions You are the holder of the patent. 1040ez form 2013 instructions You transfer the patent other than by gift, inheritance, or devise. 1040ez form 2013 instructions You transfer all substantial rights to the patent or an undivided interest in all such rights. 1040ez form 2013 instructions You do not transfer the patent to a related person. 1040ez form 2013 instructions Holder. 1040ez form 2013 instructions   You are the holder of a patent if you are either of the following. 1040ez form 2013 instructions The individual whose effort created the patent property and who qualifies as the original and first inventor. 1040ez form 2013 instructions The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. 1040ez form 2013 instructions All substantial rights. 1040ez form 2013 instructions   All substantial rights to patent property are all rights that have value when they are transferred. 1040ez form 2013 instructions A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. 1040ez form 2013 instructions   All substantial rights to a patent are not transferred if any of the following apply to the transfer. 1040ez form 2013 instructions The rights are limited geographically within a country. 1040ez form 2013 instructions The rights are limited to a period less than the remaining life of the patent. 1040ez form 2013 instructions The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. 1040ez form 2013 instructions The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. 1040ez form 2013 instructions Related persons. 1040ez form 2013 instructions   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. 1040ez form 2013 instructions Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. 1040ez form 2013 instructions Substitute “25% or more” ownership for “more than 50%. 1040ez form 2013 instructions ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. 1040ez form 2013 instructions For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. 1040ez form 2013 instructions The brother-sister exception does not apply because the trust relationship is independent of family status. 1040ez form 2013 instructions Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. 1040ez form 2013 instructions A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. 1040ez form 2013 instructions Significant power, right, or continuing interest. 1040ez form 2013 instructions   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. 1040ez form 2013 instructions   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. 1040ez form 2013 instructions A right to disapprove any assignment of the interest, or any part of it. 1040ez form 2013 instructions A right to end the agreement at will. 1040ez form 2013 instructions A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. 1040ez form 2013 instructions A right to make the recipient sell or advertise only your products or services. 1040ez form 2013 instructions A right to make the recipient buy most supplies and equipment from you. 1040ez form 2013 instructions A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. 1040ez form 2013 instructions Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. 1040ez form 2013 instructions However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. 1040ez form 2013 instructions See section 1237 of the Internal Revenue Code. 1040ez form 2013 instructions Timber Standing timber held as investment property is a capital asset. 1040ez form 2013 instructions Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. 1040ez form 2013 instructions If you held the timber primarily for sale to customers, it is not a capital asset. 1040ez form 2013 instructions Gain or loss on its sale is ordinary business income or loss. 1040ez form 2013 instructions It is reported in the gross receipts or sales and cost of goods sold items of your return. 1040ez form 2013 instructions Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. 1040ez form 2013 instructions These sales constitute a very minor part of their farm businesses. 1040ez form 2013 instructions In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. 1040ez form 2013 instructions , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. 1040ez form 2013 instructions Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. 1040ez form 2013 instructions Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. 1040ez form 2013 instructions This is true whether the timber is cut under contract or whether you cut it yourself. 1040ez form 2013 instructions Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. 1040ez form 2013 instructions See chapter 3. 1040ez form 2013 instructions Gain or loss is reported on Form 4797. 1040ez form 2013 instructions Christmas trees. 1040ez form 2013 instructions   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. 1040ez form 2013 instructions They qualify for both rules discussed below. 1040ez form 2013 instructions Election to treat cutting as a sale or exchange. 1040ez form 2013 instructions   Under the general rule, the cutting of timber results in no gain or loss. 1040ez form 2013 instructions It is not until a sale or exchange occurs that gain or loss is realized. 1040ez form 2013 instructions But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. 1040ez form 2013 instructions Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. 1040ez form 2013 instructions Any later sale results in ordinary business income or loss. 1040ez form 2013 instructions See Example, later. 1040ez form 2013 instructions   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. 1040ez form 2013 instructions Making the election. 1040ez form 2013 instructions   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. 1040ez form 2013 instructions You do not have to make the election in the first year you cut timber. 1040ez form 2013 instructions You can make it in any year to which the election would apply. 1040ez form 2013 instructions If the timber is partnership property, the election is made on the partnership return. 1040ez form 2013 instructions This election cannot be made on an amended return. 1040ez form 2013 instructions   Once you have made the election, it remains in effect for all later years unless you cancel it. 1040ez form 2013 instructions   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. 1040ez form 2013 instructions The prior election (and revocation) is disregarded for purposes of making a subsequent election. 1040ez form 2013 instructions See Form T (Timber), Forest Activities Schedule, for more information. 1040ez form 2013 instructions Gain or loss. 1040ez form 2013 instructions   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. 1040ez form 2013 instructions   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. 1040ez form 2013 instructions Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. 1040ez form 2013 instructions   Timber depletion is discussed in chapter 9 of Publication 535. 1040ez form 2013 instructions Example. 1040ez form 2013 instructions In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. 1040ez form 2013 instructions It had an adjusted basis for depletion of $40 per MBF. 1040ez form 2013 instructions You are a calendar year taxpayer. 1040ez form 2013 instructions On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. 1040ez form 2013 instructions It was cut in April for sale. 1040ez form 2013 instructions On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. 1040ez form 2013 instructions You report the difference between the fair market value and your adjusted basis for depletion as a gain. 1040ez form 2013 instructions This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. 1040ez form 2013 instructions You figure your gain as follows. 1040ez form 2013 instructions FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. 1040ez form 2013 instructions Outright sales of timber. 1040ez form 2013 instructions   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). 1040ez form 2013 instructions However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). 1040ez form 2013 instructions Cutting contract. 1040ez form 2013 instructions   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. 1040ez form 2013 instructions You are the owner of the timber. 1040ez form 2013 instructions You held the timber longer than 1 year before its disposal. 1040ez form 2013 instructions You kept an economic interest in the timber. 1040ez form 2013 instructions   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. 1040ez form 2013 instructions   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. 1040ez form 2013 instructions Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. 1040ez form 2013 instructions Date of disposal. 1040ez form 2013 instructions   The date of disposal is the date the timber is cut. 1040ez form 2013 instructions However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. 1040ez form 2013 instructions   This election applies only to figure the holding period of the timber. 1040ez form 2013 instructions It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). 1040ez form 2013 instructions   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. 1040ez form 2013 instructions The statement must identify the advance payments subject to the election and the contract under which they were made. 1040ez form 2013 instructions   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). 1040ez form 2013 instructions Attach the statement to the amended return and write “Filed pursuant to section 301. 1040ez form 2013 instructions 9100-2” at the top of the statement. 1040ez form 2013 instructions File the amended return at the same address the original return was filed. 1040ez form 2013 instructions Owner. 1040ez form 2013 instructions   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. 1040ez form 2013 instructions You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. 1040ez form 2013 instructions Tree stumps. 1040ez form 2013 instructions   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. 1040ez form 2013 instructions Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. 1040ez form 2013 instructions However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. 1040ez form 2013 instructions Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. 1040ez form 2013 instructions   See Form T (Timber) and its separate instructions for more information about dispositions of timber. 1040ez form 2013 instructions Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. 1040ez form 2013 instructions , are capital assets except when they are held for sale by a dealer. 1040ez form 2013 instructions Any gain or loss from their sale or exchange generally is a capital gain or loss. 1040ez form 2013 instructions If you are a dealer, the amount received from the sale is ordinary business income. 1040ez form 2013 instructions Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. 1040ez form 2013 instructions You owned the coal or iron ore longer than 1 year before its disposal. 1040ez form 2013 instructions You kept an economic interest in the coal or iron ore. 1040ez form 2013 instructions For this rule, the date the coal or iron ore is mined is considered the date of its disposal. 1040ez form 2013 instructions Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). 1040ez form 2013 instructions This amount is included on Form 4797 along with your other section 1231 gains and losses. 1040ez form 2013 instructions You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. 1040ez form 2013 instructions If you own only an option to buy the coal in place, you do not qualify as an owner. 1040ez form 2013 instructions In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. 1040ez form 2013 instructions The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. 1040ez form 2013 instructions Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. 1040ez form 2013 instructions If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. 1040ez form 2013 instructions Special rule. 1040ez form 2013 instructions   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. 1040ez form 2013 instructions A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). 1040ez form 2013 instructions An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. 1040ez form 2013 instructions Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. 1040ez form 2013 instructions This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. 1040ez form 2013 instructions An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). 1040ez form 2013 instructions A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. 1040ez form 2013 instructions Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. 1040ez form 2013 instructions For more information, see chapter 4 of Publication 550. 1040ez form 2013 instructions Prev  Up  Next   Home   More Online Publications