File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

1040ez Form Instructions

Free State Tax File2011 Ez Tax FormFree H & R Block Tax FilingFree 1040ez Online2012 1040x Tax FormForm 1040 Ez 2013 InstructionsHr Block Free Tax ReturnIncome State Tax Forms2009 Tax2013 State Income Tax FormFile State And Federal Taxes For FreeCan You E File An Amended ReturnFile 2010 Taxes Free OnlineWww Irs Gov Form1040aH And R Block Free TaxFree State Tax Filing TurbotaxFree File For State Income TaxHow To File State Taxes For Free OnlineE File Back TaxesForm 1040x 20132014 Tax Forms 1040ezHow To Amend My TaxesFiling 2011 Taxes OnlineWww Irs Gov FormspubsFile 1040 Ez Online1040ez 2012 InstructionsFile 1040nr EzMy Free TaxesFile Past Taxes For FreeH And R Block TaxHow To File Taxes For 2011Free Tax Filing1040x Amended Return 2012Can You File Your 2011 Taxes To 2013 FilingTax Online FreeSenior Income Tax1040x For 2011Myfreetaxes Com BaltimorecashCan I File My Back Taxes Online Free2012 Federal Tax Forms 1040a

1040ez Form Instructions

1040ez form instructions 4. 1040ez form instructions   Unrelated Business Taxable Income Table of Contents IncomeExclusions Dues of Agricultural Organizations and Business Leagues DeductionsDirectly Connected Exploitation of Exempt Activity—Advertising Sales Modifications Partnership Income or Loss S Corporation Income or Loss Special Rules for Foreign Organizations Special Rules for Social Clubs, VEBAs, SUBs, and GLSOsIncome that is set aside. 1040ez form instructions Special Rules for Veterans' Organizations Income From Controlled OrganizationsAddition to tax for valuation misstatements. 1040ez form instructions Net unrelated income. 1040ez form instructions Net unrelated loss. 1040ez form instructions Control. 1040ez form instructions Income from property financed with qualified 501(c)(3) bonds. 1040ez form instructions Disposition of property received from taxable subsidiary and used in unrelated business. 1040ez form instructions Income From Debt-Financed Property Debt-Financed PropertyAcquisition Indebtedness Computation of Debt-Financed Income Deductions for Debt-Financed Property Allocation Rules How to Get Tax Help The term “unrelated business taxable income” generally means the gross income derived from any unrelated trade or business regularly conducted by the exempt organization, less the deductions directly connected with carrying on the trade or business. 1040ez form instructions If an organization regularly carries on two or more unrelated business activities, its unrelated business taxable income is the total of gross income from all such activities less the total allowable deductions attributable to all the activities. 1040ez form instructions In computing unrelated business taxable income, gross income and deductions are subject to the modifications and special rules explained in this chapter. 1040ez form instructions Whether a particular item of income or expense falls within any of these modifications or special rules must be determined by all the facts and circumstances in each specific case. 1040ez form instructions For example, if the organization received a payment termed rent that is in fact a return of profits by a person operating the property for the benefit of the organization, or that is a share of the profits retained by the organization as a partner or joint venturer, the payment is not within the income exclusion for rents, discussed later under Exclusions. 1040ez form instructions Income Generally, unrelated business income is taxable, but there are exclusions and special rules that must be considered when figuring the income. 1040ez form instructions Exclusions The following types of income (and deductions directly connected with the income) are generally excluded when figuring unrelated business taxable income. 1040ez form instructions Dividends, interest, annuities and other investment income. 1040ez form instructions   All dividends, interest, annuities, payments with respect to securities loans, income from notional principal contracts, and other income from an exempt organization's ordinary and routine investments that the IRS determines are substantially similar to these types of income are excluded in computing unrelated business taxable income. 1040ez form instructions Exception for insurance activity income of a controlled foreign corporation. 1040ez form instructions   This exclusion does not apply to income from certain insurance activities of an exempt organization's controlled foreign corporation. 1040ez form instructions The income is not excludable dividend income, but instead is unrelated business taxable income to the extent it would be so treated if the exempt organization had earned it directly. 1040ez form instructions Certain exceptions to this rule apply. 1040ez form instructions For more information, see section 512(b)(17). 1040ez form instructions Other exceptions. 1040ez form instructions   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), to interest or annuities received from a controlled corporation (discussed under Income From Controlled Organizations, later). 1040ez form instructions Income from lending securities. 1040ez form instructions   Payments received with respect to a security loan are excluded in computing unrelated business taxable income only if the loan is made under an agreement that:    Provides for the return to the exempt organization of securities identical to the securities loaned, Requires payments to the organization of amounts equivalent to all interest, dividends, and other distributions that the owner of the securities is entitled to receive during the period of the loan, Does not reduce the organization's risk of loss or opportunity for gain on the securities, Contains reasonable procedures to implement the obligation of the borrower to furnish collateral to the organization with a fair market value each business day during the period of the loan in an amount not less than the fair market value of the securities at the close of the preceding business day, and Permits the organization to terminate the loan upon notice of not more than 5 business days. 1040ez form instructions   Payments with respect to securities loans include: Amounts in respect of dividends, interest, and other distributions, Fees based on the period of time the loan is in effect and the fair market value of the security during that period, Income from collateral security for the loan, and Income from the investment of collateral security. 1040ez form instructions The payments are considered to be from the securities loaned and not from collateral security or the investment of collateral security from the loans. 1040ez form instructions Any deductions that are directly connected with collateral security for the loan, or with the investment of collateral security, are considered deductions that are directly connected with the securities loaned. 1040ez form instructions Royalties. 1040ez form instructions   Royalties, including overriding royalties, are excluded in computing unrelated business taxable income. 1040ez form instructions   To be considered a royalty, a payment must relate to the use of a valuable right. 1040ez form instructions Payments for trademarks, trade names, or copyrights are ordinarily considered royalties. 1040ez form instructions Similarly, payments for the use of a professional athlete's name, photograph, likeness, or facsimile signature are ordinarily considered royalties. 1040ez form instructions However, royalties do not include payments for personal services. 1040ez form instructions Therefore, payments for personal appearances and interviews are not excluded as royalties and must be included in figuring unrelated business taxable income. 1040ez form instructions   Unrelated business taxable income does not include royalty income received from licensees by an exempt organization that is the legal and beneficial owner of patents assigned to it by inventors for specified percentages of future royalties. 1040ez form instructions   Mineral royalties are excluded whether measured by production or by gross or taxable income from the mineral property. 1040ez form instructions However, the exclusion does not apply to royalties that stem from an arrangement whereby the organization owns a working interest in a mineral property and is liable for its share of the development and operating costs under the terms of its agreement with the operator of the property. 1040ez form instructions To the extent they are not treated as loans under section 636 (relating to income tax treatment of mineral production payments), payments for mineral production are treated in the same manner as royalty payments for the purpose of computing unrelated business taxable income. 1040ez form instructions To the extent they are treated as loans, any payments for production that are the equivalent of interest are treated as interest and are excluded. 1040ez form instructions Exceptions. 1040ez form instructions   This exclusion does not apply to debt-financed income (discussed under Income From Debt-Financed Property, later) or to royalties received from a controlled corporation (discussed under Income From Controlled Organizations, later). 1040ez form instructions Rents. 1040ez form instructions   Rents from real property, including elevators and escalators, are excluded in computing unrelated business taxable income. 1040ez form instructions Rents from personal property are not excluded. 1040ez form instructions However, special rules apply to “mixed leases” of both real and personal property. 1040ez form instructions Mixed leases. 1040ez form instructions   In a mixed lease, all of the rents are excluded if the rents attributable to the personal property are not more than 10% of the total rents under the lease, as determined when the personal property is first placed in service by the lessee. 1040ez form instructions If the rents attributable to personal property are more than 10% but not more than 50% of the total rents, only the rents attributable to the real property are excluded. 1040ez form instructions If the rents attributable to the personal property are more than 50% of the total rents, none of the rents are excludable. 1040ez form instructions   Property is placed in service when the lessee first may use it under the terms of a lease. 1040ez form instructions For example, property subject to a lease entered into on November 1, for a term starting on January 1 of the next year, is considered placed in service on January 1, regardless of when the lessee first actually uses it. 1040ez form instructions   If separate leases are entered into for real and personal property and the properties have an integrated use (for example, one or more leases for real property and another lease or leases for personal property to be used on the real property), all the leases will be considered as one lease. 1040ez form instructions   The rent attributable to the personal property must be recomputed, and the treatment of the rents must be redetermined, if: The rent attributable to all the leased personal property increases by 100% or more because additional or substitute personal property is placed in service, or The lease is modified to change the rent charged (whether or not the amount of rented personal property changes). 1040ez form instructions Any change in the treatment of rents resulting from the recomputation is effective only for the period beginning with the event that caused the recomputation. 1040ez form instructions Exception for rents based on net profit. 1040ez form instructions   The exclusion for rents does not apply if the amount of the rent depends on the income or profits derived by any person from the leased property, other than an amount based on a fixed percentage of the gross receipts or sales. 1040ez form instructions Exception for income from personal services. 1040ez form instructions   Payment for occupying space when personal services are also rendered to the occupant does not constitute rent from real property. 1040ez form instructions Therefore, the exclusion does not apply to transactions such as renting hotel rooms, rooms in boarding houses or tourist homes, and space in parking lots or warehouses. 1040ez form instructions Other exceptions. 1040ez form instructions   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), or to interest, annuities, royalties and rents received from a controlled corporation (discussed under Income From Controlled Organizations, later), investment income (dividends, interest, rents, etc. 1040ez form instructions ) received by organizations described in sections 501(c)(7), 501(c)(9), 501(c)(17), and 501(c)(20). 1040ez form instructions See Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs, discussed later for more information. 1040ez form instructions Income from research. 1040ez form instructions   A tax-exempt organization may exclude income from research grants or contracts from unrelated business taxable income. 1040ez form instructions However, the extent of the exclusion depends on the nature of the organization and the type of research. 1040ez form instructions   Income from research for the United States, any of its agencies or instrumentalities, or a state or any of its political subdivisions is excluded when computing unrelated business taxable income. 1040ez form instructions   For a college, university, or hospital, all income from research, whether fundamental or applied, is excluded in computing unrelated business taxable income. 1040ez form instructions   When an organization is operated primarily to conduct fundamental research (as distinguished from applied research) and the results are freely available to the general public, all income from research performed for any person is excluded in computing unrelated business taxable income. 1040ez form instructions   The term research, for this purpose, does not include activities of a type normally conducted as an incident to commercial or industrial operations, such as testing or inspecting materials or products, or designing or constructing equipment, buildings, etc. 1040ez form instructions In addition, the term fundamental research does not include research conducted for the primary purpose of commercial or industrial application. 1040ez form instructions Gains and losses from disposition of property. 1040ez form instructions   Also excluded from unrelated business taxable income are gains or losses from the sale, exchange, or other disposition of property other than: Stock in trade or other property of a kind that would properly be includable in inventory if on hand at the close of the tax year, Property held primarily for sale to customers in the ordinary course of a trade or business, or Cutting of timber that an organization has elected to consider as a sale or exchange of the timber. 1040ez form instructions   It should be noted that the last exception relates only to cut timber. 1040ez form instructions The sale, exchange, or other disposition of standing timber is excluded from the computation of unrelated business income, unless it constitutes property held for sale to customers in the ordinary course of business. 1040ez form instructions Lapse or termination of options. 1040ez form instructions   Any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. 1040ez form instructions The exclusion applies only if the option is written in connection with the exempt organization's investment activities. 1040ez form instructions Therefore, this exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. 1040ez form instructions Exception. 1040ez form instructions   This exclusion does not apply to unrelated debt-financed income, discussed later under Income From Debt-Financed Property. 1040ez form instructions Gain or loss on disposition of certain brownfield property. 1040ez form instructions   Gain or loss from the qualifying sale, exchange, or other disposition of a qualifying brownfield property (as defined in section 512(b)(19)(C)), which was acquired by the organization after December 31, 2005 and before January 1, 2011, is excluded from unrelated business taxable income and is excepted from the debt-financed rules for such property. 1040ez form instructions See sections 512(b)(19) and 514(b)(1)(E). 1040ez form instructions Income from services provided under federal license. 1040ez form instructions   There is a further exclusion from unrelated business taxable income of income from a trade or business conducted by a religious order or by an educational organization maintained by the order. 1040ez form instructions   This exclusion applies only if the following requirements are met. 1040ez form instructions The trade or business must have been operated by the order or by the institution before May 27, 1959. 1040ez form instructions The trade or business must provide services under a license issued by a federal regulatory agency. 1040ez form instructions More than 90% of the net income from the business for the tax year must be devoted to religious, charitable, or educational purposes that constitute the basis for the religious order's exemption. 1040ez form instructions The rates or other charges for these services must be fully competitive with the rates or other charges of similar taxable businesses. 1040ez form instructions Rates or other charges for these services will be considered as fully competitive if they are neither materially higher nor materially lower than the rates charged by similar businesses operating in the same general area. 1040ez form instructions Exception. 1040ez form instructions    This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later). 1040ez form instructions Member income of mutual or cooperative electric companies. 1040ez form instructions   Income of a mutual or cooperative electric company described in section 501(c)(12) which is treated as member income under subparagraph (H) of that section is excluded from unrelated business taxable income. 1040ez form instructions Dues of Agricultural Organizations and Business Leagues Dues received from associate members by organizations exempt under section 501(c)(5) or section 501(c)(6) may be treated as gross income from an unrelated trade or business if the associate member category exists for the principal purpose of producing unrelated business income. 1040ez form instructions For example, if an organization creates an associate member category solely to allow associate members to purchase insurance through the organization, the associate member dues may be unrelated business income. 1040ez form instructions Exception. 1040ez form instructions   Associate member dues received by an agricultural or horticultural organization are not treated as gross income from an unrelated trade or business, regardless of their purpose, if they are not more than the annual limit. 1040ez form instructions The limit on dues paid by an associate member is $148 for 2011. 1040ez form instructions   If the required annual dues are more than the limit, the entire amount is treated as income from an unrelated business unless the associate member category was formed or availed of for the principal purpose of furthering the organization's exempt purposes. 1040ez form instructions Deductions To qualify as allowable deductions in computing unrelated business taxable income, the expenses, depreciation, and similar items generally must be allowable income tax deductions that are directly connected with carrying on an unrelated trade or business. 1040ez form instructions They cannot be directly connected with excluded income. 1040ez form instructions For an exception to the “directly connected” requirement, see Charitable contributions deduction, under Modifications, later. 1040ez form instructions Directly Connected To be directly connected with the conduct of an unrelated business, deductions must have a proximate and primary relationship to carrying on that business. 1040ez form instructions For an exception, see Expenses attributable to exploitation of exempt activities, later. 1040ez form instructions Expenses attributable solely to unrelated business. 1040ez form instructions   Expenses, depreciation, and similar items attributable solely to the conduct of an unrelated business are proximately and primarily related to that business and qualify for deduction to the extent that they are otherwise allowable income tax deductions. 1040ez form instructions   For example, salaries of personnel employed full-time to conduct the unrelated business and depreciation of a building used entirely in the conduct of that business are deductible to the extent otherwise allowable. 1040ez form instructions Expenses attributable to dual use of facilities or personnel. 1040ez form instructions   When facilities or personnel are used both to conduct exempt functions and to conduct an unrelated trade or business, expenses, depreciation, and similar items attributable to the facilities or personnel must be allocated between the two uses on a reasonable basis. 1040ez form instructions The part of an item allocated to the unrelated trade or business is proximately and primarily related to that business and is allowable as a deduction in computing unrelated business taxable income if the expense is otherwise an allowable income tax deduction. 1040ez form instructions Example 1. 1040ez form instructions A school recognized as a tax-exempt organization contracts with an individual to conduct a summer tennis camp. 1040ez form instructions The school provides the tennis courts, housing, and dining facilities. 1040ez form instructions The contracted individual hires the instructors, recruits campers, and provides supervision. 1040ez form instructions The income the school receives from this activity is from a dual use of the facilities and personnel. 1040ez form instructions The school, in computing its unrelated business taxable income, may deduct an allocable part of the expenses attributable to the facilities and personnel. 1040ez form instructions Example 2. 1040ez form instructions An exempt organization with gross income from an unrelated trade or business pays its president $90,000 a year. 1040ez form instructions The president devotes approximately 10% of his time to the unrelated business. 1040ez form instructions To figure the organization's unrelated business taxable income, a deduction of $9,000 ($90,000 × 10%) is allowed for the salary paid to its president. 1040ez form instructions Expenses attributable to exploitation of exempt activities. 1040ez form instructions   Generally, expenses, depreciation, and similar items attributable to the conduct of an exempt activity are not deductible in computing unrelated business taxable income from an unrelated trade or business that exploits the exempt activity. 1040ez form instructions (See Exploitation of exempt functions under Not substantially related in chapter 3. 1040ez form instructions ) This is because they do not have a proximate and primary relationship to the unrelated trade or business, and therefore, they do not qualify as directly connected with that business. 1040ez form instructions Exception. 1040ez form instructions   Expenses, depreciation, and similar items may be treated as directly connected with the conduct of the unrelated business if all the following statements are true. 1040ez form instructions The unrelated business exploits the exempt activity. 1040ez form instructions The unrelated business is a type normally conducted for profit by taxable organizations. 1040ez form instructions The exempt activity is a type normally conducted by taxable organizations in carrying on that type of business. 1040ez form instructions The amount treated as directly connected is the smaller of: The excess of these expenses, depreciation, and similar items over the income from, or attributable to, the exempt activity; or The gross unrelated business income reduced by all other expenses, depreciation, and other items that are actually directly connected. 1040ez form instructions   The application of these rules to an advertising activity that exploits an exempt publishing activity is explained next. 1040ez form instructions Exploitation of Exempt Activity—Advertising Sales The sale of advertising in a periodical of an exempt organization that contains editorial material related to the accomplishment of the organization's exempt purpose is an unrelated business that exploits an exempt activity, the circulation and readership of the periodical. 1040ez form instructions Therefore, in addition to direct advertising costs, exempt activity costs (expenses, depreciation, and similar expenses attributable to the production and distribution of the editorial or readership content) can be treated as directly connected with the conduct of the advertising activity. 1040ez form instructions (See Expenses attributable to exploitation of exempt activities under Directly Connected, earlier. 1040ez form instructions ) Figuring unrelated business taxable income (UBTI). 1040ez form instructions   The UBTI of an advertising activity is the amount shown in the following chart. 1040ez form instructions IF gross advertising income is . 1040ez form instructions . 1040ez form instructions . 1040ez form instructions THEN UBTI is . 1040ez form instructions . 1040ez form instructions . 1040ez form instructions More than direct advertising costs The excess advertising income, reduced (but not below zero) by the excess, if any, of readership costs over circulation income. 1040ez form instructions Equal to or less than direct advertising costs Zero. 1040ez form instructions   • Circulation income and readership costs are not taken into account. 1040ez form instructions   • Any excess advertising costs reduce (but not below zero) UBTI from any other unrelated business activity. 1040ez form instructions   The terms used in the chart are explained in the following discussions. 1040ez form instructions Periodical Income Gross advertising income. 1040ez form instructions   This is all the income from the unrelated advertising activities of an exempt organization periodical. 1040ez form instructions Circulation income. 1040ez form instructions   This is all the income from the production, distribution, or circulation of an exempt organization's periodical (other than gross advertising income). 1040ez form instructions It includes all amounts from the sale or distribution of the readership content of the periodical, such as income from subscriptions. 1040ez form instructions It also includes allocable membership receipts if the right to receive the periodical is associated with a membership or similar status in the organization. 1040ez form instructions Allocable membership receipts. 1040ez form instructions   This is the part of membership receipts (dues, fees, or other charges associated with membership) equal to the amount that would have been charged and paid for the periodical if: The periodical was published by a taxable organization, The periodical was published for profit, and The member was an unrelated party dealing with the taxable organization at arm's length. 1040ez form instructions   The amount used to allocate membership receipts is the amount shown in the following chart. 1040ez form instructions   For this purpose, the total periodical costs are the sum of the direct advertising costs and the readership costs, explained under Periodical Costs, later. 1040ez form instructions The cost of other exempt activities means the total expenses incurred by the organization in connection with its other exempt activities, not offset by any income earned by the organization from those activities. 1040ez form instructions IF . 1040ez form instructions . 1040ez form instructions . 1040ez form instructions THEN the amount used to allocate membership receipts is . 1040ez form instructions . 1040ez form instructions . 1040ez form instructions 20% or more of the total circulation consists of sales to nonmembers The subscription price charged nonmembers. 1040ez form instructions The above condition does not apply, and 20% or more of the members pay reduced dues because they do not receive the periodical The reduction in dues for a member not receiving the periodical. 1040ez form instructions Neither of the above conditions applies The membership receipts multiplied by this fraction:   Total periodical costs Total periodical costs Plus Cost of other exempt activities Example 1. 1040ez form instructions U is an exempt scientific organization with 10,000 members who pay annual dues of $15. 1040ez form instructions One of U's activities is publishing a monthly periodical distributed to all of its members. 1040ez form instructions U also distributes 5,000 additional copies of its periodical to nonmembers, who subscribe for $10 a year. 1040ez form instructions Since the nonmember circulation of U's periodical represents one-third (more than 20%) of its total circulation, the subscription price charged to nonmembers is used to determine the part of U's membership receipts allocable to the periodical. 1040ez form instructions Thus, U's allocable membership receipts are $100,000 ($10 times 10,000 members), and U's total circulation income for the periodical is $150,000 ($100,000 from members plus $50,000 from sales to nonmembers). 1040ez form instructions Example 2. 1040ez form instructions Assume the same facts except that U sells only 500 copies of its periodical to nonmembers, at a price of $10 a year. 1040ez form instructions Assume also that U's members may elect not to receive the periodical, in which case their dues are reduced from $15 a year to $6 a year, and that only 3,000 members elect to receive the periodical and pay the full dues of $15 a year. 1040ez form instructions U's stated subscription price of $9 to members consistently results in an excess of total income (including gross advertising income) attributable to the periodical over total costs of the periodical. 1040ez form instructions Since the 500 copies of the periodical distributed to nonmembers represent only 14% of the 3,500 copies distributed, the $10 subscription price charged to nonmembers is not used to determine the part of membership receipts allocable to the periodical. 1040ez form instructions Instead, since 70% of the members elect not to receive the periodical and pay $9 less per year in dues, the $9 price is used to determine the subscription price charged to members. 1040ez form instructions Thus, the allocable membership receipts will be $9 a member, or $27,000 ($9 times 3,000 copies). 1040ez form instructions U's total circulation income is $32,000 ($27,000 plus the $5,000 from nonmember subscriptions). 1040ez form instructions Periodical Costs Direct advertising costs. 1040ez form instructions   These are expenses, depreciation, and similar items of deduction directly connected with selling and publishing advertising in the periodical. 1040ez form instructions   Examples of allowable deductions under this classification include agency commissions and other direct selling costs, such as transportation and travel expenses, office salaries, promotion and research expenses, and office overhead directly connected with the sale of advertising lineage in the periodical. 1040ez form instructions Also included are other deductions commonly classified as advertising costs under standard account classifications, such as artwork and copy preparation, telephone, telegraph, postage, and similar costs directly connected with advertising. 1040ez form instructions   In addition, direct advertising costs include the part of mechanical and distribution costs attributable to advertising lineage. 1040ez form instructions For this purpose, the general account classifications of items includable in mechanical and distribution costs ordinarily employed in business-paper and consumer-publication accounting provide a guide for the computation. 1040ez form instructions Accordingly, the mechanical and distribution costs include the part of the costs and other expenses of composition, press work, binding, mailing (including paper and wrappers used for mailing), and bulk postage attributable to the advertising lineage of the publication. 1040ez form instructions   In the absence of specific and detailed records, the part of mechanical and distribution costs attributable to the periodical's advertising lineage can be based on the ratio of advertising lineage to total lineage in the periodical, if this allocation is reasonable. 1040ez form instructions Readership costs. 1040ez form instructions   These are all expenses, depreciation, and similar items that are directly connected with the production and distribution of the readership content of the periodical. 1040ez form instructions Costs partly attributable to other activities. 1040ez form instructions   Deductions properly attributable to exempt activities other than publishing the periodical may not be allocated to the periodical. 1040ez form instructions When expenses are attributable both to the periodical and to the organization's other activities, an allocation must be made on a reasonable basis. 1040ez form instructions The method of allocation will vary with the nature of the item, but once adopted, should be used consistently. 1040ez form instructions Allocations based on dollar receipts from various exempt activities generally are not reasonable since receipts usually do not accurately reflect the costs associated with specific activities that an exempt organization conducts. 1040ez form instructions Consolidated Periodicals If an exempt organization publishes more than one periodical to produce income, it may treat all of them (but not less than all) as one in determining unrelated business taxable income from selling advertising. 1040ez form instructions It treats the gross income from all the periodicals, and the deductions directly connected with them, on a consolidated basis. 1040ez form instructions Consolidated treatment, once adopted, must be followed consistently and is binding. 1040ez form instructions This treatment can be changed only with the consent of the Internal Revenue Service. 1040ez form instructions An exempt organization's periodical is published to produce income if: The periodical generates gross advertising income to the organization equal to at least 25% of its readership costs, and Publishing the periodical is an activity engaged in for profit. 1040ez form instructions Whether the publication of a periodical is an activity engaged in for profit can be determined only by all the facts and circumstances in each case. 1040ez form instructions The facts and circumstances must show that the organization carries on the activity for economic profit, although there may not be a profit in a particular year. 1040ez form instructions For example, if an organization begins publishing a new periodical whose total costs exceed total income in the start-up years because of lack of advertising sales, that does not mean that the organization did not have as its objective an economic profit. 1040ez form instructions The organization may establish that it had this objective by showing it can reasonably expect advertising sales to increase, so that total income will exceed costs within a reasonable time. 1040ez form instructions Example. 1040ez form instructions Y, an exempt trade association, publishes three periodicals that it distributes to its members: a weekly newsletter, a monthly magazine, and a quarterly journal. 1040ez form instructions Both the monthly magazine and the quarterly journal contain advertising that accounts for gross advertising income equal to more than 25% of their respective readership costs. 1040ez form instructions Similarly, the total income attributable to each periodical has exceeded the total deductions attributable to each periodical for substantially all the years they have been published. 1040ez form instructions The newsletter carries no advertising and its annual subscription price is not intended to cover the cost of publication. 1040ez form instructions The newsletter is a service that Y distributes to all of its members in an effort to keep them informed of changes occurring in the business world. 1040ez form instructions It is not engaged in for profit. 1040ez form instructions Under these circumstances, Y may consolidate the income and deductions from the monthly and quarterly journals in computing its unrelated business taxable income. 1040ez form instructions It may not consolidate the income and deductions from the newsletter with the income and deductions of its other periodicals, since the newsletter is not published for the production of income. 1040ez form instructions Modifications Net operating loss deduction. 1040ez form instructions   The net operating loss (NOL) deduction (as provided in section 172) is allowed in computing unrelated business taxable income. 1040ez form instructions However, the NOL for any tax year, the carrybacks and carryovers of NOLs, and the NOL deduction are determined without taking into account any amount of income or deduction that has been specifically excluded in computing unrelated business taxable income. 1040ez form instructions For example, a loss from an unrelated trade or business is not diminished because dividend income was received. 1040ez form instructions   If this were not done, organizations would, in effect, be taxed on their exempt income, since unrelated business losses then would be offset by dividends, interest, and other excluded income. 1040ez form instructions This would reduce the loss that could be applied against unrelated business income of prior or future tax years. 1040ez form instructions Therefore, to preserve the immunity of exempt income, all NOL computations are limited to those items of income and deductions that affect the unrelated business taxable income. 1040ez form instructions   In line with this concept, an NOL carryback or carryover is allowed only from a tax year for which the organization is subject to tax on unrelated business income. 1040ez form instructions   For example, if an organization just became subject to the tax last year, its NOL for that year is not a carryback to a prior year when it had no unrelated business taxable income, nor is its NOL carryover to succeeding years reduced by the related income of those prior years. 1040ez form instructions   However, in determining the span of years for which an NOL may be carried back or forward, the tax years for which the organization is not subject to the tax on unrelated business income are counted. 1040ez form instructions For example, if an organization was subject to the tax for 2009 and had an NOL for that year, the last tax year to which any part of that loss may be carried over is 2029, regardless of whether the organization was subject to the unrelated business income tax in any of the intervening years. 1040ez form instructions   For more details on the NOL deduction, including property eligible for an extended carryback period, see sections 172 and 1400N, Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. 1040ez form instructions Charitable contributions deduction. 1040ez form instructions   An exempt organization is allowed to deduct its charitable contributions in computing its unrelated business taxable income whether or not the contributions are directly connected with the unrelated business. 1040ez form instructions   To be deductible, the contribution must be paid to another qualified organization. 1040ez form instructions For example, an exempt university that operates an unrelated business may deduct a contribution made to another university for educational work, but may not claim a deduction for contributions of amounts spent for carrying out its own educational program. 1040ez form instructions   For purposes of the deduction, a distribution by a trust made under the trust instrument to a beneficiary, which itself is a qualified organization, is treated the same as a contribution. 1040ez form instructions Deduction limits. 1040ez form instructions   An exempt organization that is subject to the unrelated business income tax at corporate rates is allowed a deduction for charitable contributions up to 10% of its unrelated business taxable income computed without regard to the deduction for contributions. 1040ez form instructions See the Instructions for Form 990-T for more information. 1040ez form instructions    An exempt trust that is subject to the unrelated business income tax at trust rates generally is allowed a deduction for charitable contributions in the same amounts as allowed for individuals. 1040ez form instructions However, the limit on the deduction is determined in relation to the trust's unrelated business taxable income computed without regard to the deduction, rather than in relation to adjusted gross income. 1040ez form instructions   Contributions in excess of the limits just described may be carried over to the next 5 tax years. 1040ez form instructions A contribution carryover is not allowed, however, to the extent that it increases an NOL carryover. 1040ez form instructions Suspension of deduction limits for farmers and ranchers. 1040ez form instructions   The limitations discussed above are temporarily suspended for certain qualified conservation contributions of property used in agriculture or livestock production. 1040ez form instructions See the Instructions for Form 990-T for details. 1040ez form instructions Specific deduction. 1040ez form instructions   In computing unrelated business taxable income, a specific deduction of $1,000 is allowed. 1040ez form instructions However, the specific deduction is not allowed in computing an NOL or the NOL deduction. 1040ez form instructions   Generally, the deduction is limited to $1,000 regardless of the number of unrelated businesses in which the organization is engaged. 1040ez form instructions Exception. 1040ez form instructions   An exception is provided in the case of a diocese, province of a religious order, or a convention or association of churches that may claim a specific deduction for each parish, individual church, district, or other local unit. 1040ez form instructions In these cases, the specific deduction for each local unit is limited to the lower of: $1,000, or Gross income derived from an unrelated trade or business regularly conducted by the local unit. 1040ez form instructions   This exception applies only to parishes, districts, or other local units that are not separate legal entities, but are components of a larger entity (diocese, province, convention, or association) filing Form 990-T. 1040ez form instructions The parent organization must file a return reporting the unrelated business gross income and related deductions of all units that are not separate legal entities. 1040ez form instructions The local units cannot file separate returns. 1040ez form instructions However, each local unit that is separately incorporated must file its own return and cannot include, or be included with, any other entity. 1040ez form instructions See Title-holding corporations in chapter 1 for a discussion of the only situation in which more than one legal entity may be included on the same Form 990-T. 1040ez form instructions Example. 1040ez form instructions X is an association of churches and is divided into local units A, B, C, and D. 1040ez form instructions Last year, A, B, C, and D derived gross income of, respectively, $1,200, $800, $1,500, and $700 from unrelated businesses that they regularly conduct. 1040ez form instructions X may claim a specific deduction of $1,000 with respect to A, $800 with respect to B, $1,000 with respect to C, and $700 with respect to D. 1040ez form instructions Partnership Income or Loss An organization may have unrelated business income or loss as a member of a partnership, rather than through direct business dealings with the public. 1040ez form instructions If so, it must treat its share of the partnership income or loss as if it had conducted the business activity in its own capacity as a corporation or trust. 1040ez form instructions No distinction is made between limited and general partners. 1040ez form instructions The organization is required to notify the partnership of its tax-exempt status. 1040ez form instructions Thus, if an organization is a member of a partnership regularly engaged in a trade or business that is an unrelated trade or business with respect to the organization, the organization must include in its unrelated business taxable income its share of the partnership's gross income from the unrelated trade or business (whether or not distributed), and the deductions attributable to it. 1040ez form instructions The partnership income and deductions to be included in the organization's unrelated business taxable income are figured the same way as any income and deductions from an unrelated trade or business conducted directly by the organization. 1040ez form instructions The partnership is required to provide the organization this information on Schedule K-1. 1040ez form instructions Example. 1040ez form instructions An exempt educational organization is a partner in a partnership that operates a factory. 1040ez form instructions The partnership also holds stock in a corporation. 1040ez form instructions The exempt organization must include its share of the gross income from operating the factory in its unrelated business taxable income but may exclude its share of any dividends the partnership received from the corporation. 1040ez form instructions Different tax years. 1040ez form instructions   If the exempt organization and the partnership of which it is a member have different tax years, the partnership items that enter into the computation of the organization's unrelated business taxable income must be based on the income and deductions of the partnership for the partnership's tax year that ends within or with the organization's tax year. 1040ez form instructions S Corporation Income or Loss An organization that owns S corporation stock must take into account its share of the S corporation's income, deductions, or losses in figuring unrelated business taxable income, regardless of the actual source or nature of the income, deductions, and losses. 1040ez form instructions For example, the organization's share of the S corporation's interest and dividend income will be taxable, even though interest and dividends are normally excluded from unrelated business taxable income. 1040ez form instructions The organization must also take into account its gain or loss on the sale or other disposition of the S corporation stock in figuring unrelated business taxable income. 1040ez form instructions Special Rules for Foreign Organizations The unrelated business taxable income of a foreign organization exempt from tax under section 501(a) consists of the organization's: Unrelated business taxable income derived from sources within the United States but not effectively connected with the conduct of a trade or business within the United States, and Unrelated business taxable income effectively connected with the conduct of a trade or business within the United States, whether or not this income is derived from sources within the United States. 1040ez form instructions To determine whether income realized by a foreign organization is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States, see sections 861 through 865 and the related regulations. 1040ez form instructions Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs The following discussion applies to: Social clubs described in section 501(c)(7), Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9), Supplemental unemployment compensation benefit trusts (SUBs) described in section 501(c)(17), and Group legal services organizations (GLSOs) described in section 501(c)(20). 1040ez form instructions These organizations must figure unrelated business taxable income under special rules. 1040ez form instructions Unlike other exempt organizations, they cannot exclude their investment income (dividends, interest, rents, etc. 1040ez form instructions ). 1040ez form instructions (See Exclusions under Income, earlier. 1040ez form instructions ) Therefore, they are generally subject to unrelated business income tax on this income. 1040ez form instructions The unrelated business taxable income of these organizations includes all gross income, less deductions directly connected with the production of that income, except that gross income for this purpose does not include exempt function income. 1040ez form instructions The dividends received by a corporation are not allowed in computing unrelated business taxable income because it is not an expense incurred in the production of income. 1040ez form instructions Losses from nonexempt activities. 1040ez form instructions   Losses from nonexempt activities of these organizations cannot be used to offset investment income unless the activities were undertaken with the intent to make a profit. 1040ez form instructions Example. 1040ez form instructions A private golf and country club that is a qualified tax-exempt social club has nonexempt function income from interest and from the sale of food and beverages to nonmembers. 1040ez form instructions The club sells food and beverages as a service to members and their guests rather than for the purpose of making a profit. 1040ez form instructions Therefore, any loss resulting from sales to nonmembers cannot be used to offset the club's interest income. 1040ez form instructions Modifications. 1040ez form instructions   The unrelated business taxable income is modified by any NOL or charitable contributions deduction and by the specific deduction (described earlier under Deductions). 1040ez form instructions Exempt function income. 1040ez form instructions   This is gross income from dues, fees, charges or similar items paid by members for goods, facilities, or services to the members or their dependents or guests, to further the organization's exempt purposes. 1040ez form instructions Exempt function income also includes income set aside for qualified purposes. 1040ez form instructions Income that is set aside. 1040ez form instructions   This is income set aside to be used for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. 1040ez form instructions In addition, for a VEBA, SUB, or GLSO, it is income set aside to provide for the payment of life, sick, accident, or other benefits. 1040ez form instructions   However, any amounts set aside by a VEBA or SUB that exceed the organization's qualified asset account limit (determined under section 419A) are unrelated business income. 1040ez form instructions Special rules apply to the treatment of existing reserves for post-retirement medical or life insurance benefits. 1040ez form instructions These rules are explained in section 512(a)(3)(E)(ii). 1040ez form instructions   Income derived from an unrelated trade or business may not be set aside and therefore cannot be exempt function income. 1040ez form instructions In addition, any income set aside and later spent for other purposes must be included in unrelated business taxable income. 1040ez form instructions   Set-aside income is generally excluded from gross income only if it is set aside in the tax year in which it is otherwise includible in gross income. 1040ez form instructions However, income set aside on or before the date for filing Form 990-T, including extensions of time, may, at the election of the organization, be treated as having been set aside in the tax year for which the return was filed. 1040ez form instructions The income set aside must have been includible in gross income for that earlier year. 1040ez form instructions Nonrecognition of gain. 1040ez form instructions   If the organization sells property used directly in performing an exempt function and purchases other property used directly in performing an exempt function, any gain on the sale is recognized only to the extent that the sales price of the old property exceeds the cost of the new property. 1040ez form instructions The purchase of the new property must be made within 1 year before the date of sale of the old property or within 3 years after the date of sale. 1040ez form instructions   This rule also applies to gain from an involuntary conversion of the property resulting from its destruction in whole or in part, theft, seizure, requisition, or condemnation. 1040ez form instructions Special Rules for Veterans' Organizations Unrelated business taxable income of a veterans' organization that is exempt under section 501(c)(19) does not include the net income from insurance business that is properly set aside. 1040ez form instructions The organization may set aside income from payments received for life, sick, accident, or health insurance for the organization's members or their dependents for the payment of insurance benefits or reasonable costs of insurance administration, or for use exclusively for religious, charitable, scientific, literary, or educational purposes, or the prevention of cruelty to children or animals. 1040ez form instructions For details, see section 512(a)(4) and the regulations under that section. 1040ez form instructions Income From Controlled Organizations The exclusions for interest, annuities, royalties, and rents, explained earlier in this chapter under Income, may not apply to a payment of these items received by a controlling organization from its controlled organization. 1040ez form instructions The payment is included in the controlling organization's unrelated business taxable income to the extent it reduced the net unrelated income (or increased the net unrelated loss) of the controlled organization. 1040ez form instructions All deductions of the controlling organization directly connected with the amount included in its unrelated business taxable income are allowed. 1040ez form instructions Excess qualifying specified payments. 1040ez form instructions   Excess qualifying specified payments received or accrued from a controlled entity are included in a controlling exempt organization's unrelated business taxable income only on the amount that exceeds that which would have been paid or accrued if the payments had been determined under section 482. 1040ez form instructions Qualifying specified payments means any payments of interest, annuities, royalties, or rents received or accrued from the controlled organization pursuant to a binding written contract in effect on August 17, 2006, or to a contract which is a renewal, under substantially similar terms of a binding written contract in effect on August 17, 2006, and the payments are received or accrued before January 1, 2012. 1040ez form instructions   If a controlled participant is not required to file a U. 1040ez form instructions S. 1040ez form instructions income tax return, the participant must ensure that the copy or copies of the Regulations section 1. 1040ez form instructions 482-7 Cost Sharing Arrangement Statement and any updates are attached to Schedule M of any Form 5471, Information Return of U. 1040ez form instructions S. 1040ez form instructions Persons With Respect To Certain Foreign Corporations, any Form 5472, Information Return of a 25% Foreign-Owned U. 1040ez form instructions S. 1040ez form instructions Corporation or a Foreign Corporation Engaged in a U. 1040ez form instructions S. 1040ez form instructions Trade or Business, or any Form 8865, Return of U. 1040ez form instructions S. 1040ez form instructions Persons With Respect to Certain Foreign Partnerships, filed for that participant. 1040ez form instructions Addition to tax for valuation misstatements. 1040ez form instructions   Under section 512(b)(13)(E)(ii), the tax imposed on a controlling organization will be increased by 20 percent of the excess qualifying specified payments that are determined with or without any amendments or supplements, whichever is larger. 1040ez form instructions See section 512(b)(13)(E)(ii) for more information. 1040ez form instructions Net unrelated income. 1040ez form instructions   This is: For an exempt organization, its unrelated business taxable income, or For a nonexempt organization, the part of its taxable income that would be unrelated business taxable income if it were exempt and had the same exempt purposes as the controlling organization. 1040ez form instructions Net unrelated loss. 1040ez form instructions   This is: For an exempt organization, its NOL, or For a nonexempt organization, the part of its NOL that would be its NOL if it were exempt and had the same exempt purposes as the controlling organization. 1040ez form instructions Control. 1040ez form instructions   An organization is controlled if: For a corporation, the controlling organization owns (by vote or value) more than 50% of the stock, For a partnership, the controlling organization owns more than 50% of the profits or capital interests, or For any other organization, the controlling organization owns more than 50% of the beneficial interest. 1040ez form instructions For this purpose, constructive ownership of stock (determined under section 318) or other interests is taken into account. 1040ez form instructions   As a result, an exempt parent organization is treated as controlling any subsidiary in which it holds more than 50% of the voting power or value, whether directly (as in the case of a first-tier subsidiary) or indirectly (as in the case of a second-tier subsidiary). 1040ez form instructions Income from property financed with qualified 501(c)(3) bonds. 1040ez form instructions If any part of a 501(c)(3) organization's property financed with qualified 501(c)(3) bonds is used in a trade or business of any person other than a section 501(c)(3) organization or a governmental unit, and such use is not consistent with the requirements for qualified 501(c)(3) bonds under section 145, the section 501(c)(3) organization is considered to have received unrelated business income in the amount of the greater of the actual rental income or the fair rental value of the property for the period it is used. 1040ez form instructions No deduction is allowed for interest on the private activity bond. 1040ez form instructions See sections 150(b)(3) and (c) for more information. 1040ez form instructions Disposition of property received from taxable subsidiary and used in unrelated business. 1040ez form instructions A taxable 80%-owned subsidiary corporation of one or more tax-exempt entities is generally subject to tax on a distribution in liquidation of its assets to its exempt parent (or parents). 1040ez form instructions The assets are treated as if sold at fair market value. 1040ez form instructions Tax-exempt entities include organizations described in sections 501(a), 529, and 115, charitable remainder trusts, U. 1040ez form instructions S. 1040ez form instructions and foreign governments, Indian tribal governments, international organizations, and similar non-taxable organizations. 1040ez form instructions A taxable corporation that transfers substantially all of its assets to a tax-exempt entity in a transaction that otherwise qualifies for nonrecognition treatment must recognize gain on the transaction as if it sold the assets at fair market value. 1040ez form instructions However, such a transfer is not taxable if it qualifies as a like-kind exchange under section 1031 or an involuntary conversion under section 1033. 1040ez form instructions In such a case the built-in appreciation is preserved in the replacement property received in the transaction. 1040ez form instructions A corporation that changes status from taxable to tax-exempt is treated generally as if it transferred all of its assets to a tax-exempt entity immediately before the change in status (thus subjecting it to the tax on a deemed sale for fair market value). 1040ez form instructions This rule does not apply where the taxable corporation becomes exempt within 3 years of formation, or had previously been exempt and within several years (generally a period of 3 years) regains exemption, unless the principal purpose of the transactions is to avoid the tax on the change in status. 1040ez form instructions In the transactions described above, the taxable event is deferred for property that the tax-exempt entity immediately uses in an unrelated business. 1040ez form instructions If the parent later disposes of the property, then any gain (not in excess of the amount not recognized) is included in the parent's unrelated business taxable income. 1040ez form instructions If there is partial use of the assets in unrelated business, then there is partial recognition of gain or loss. 1040ez form instructions Property is treated as disposed if the tax-exempt entity no longer uses it in an unrelated business. 1040ez form instructions Losses on the transfer of assets to a tax-exempt entity are disallowed if part of a plan with a principal purpose of recognizing losses. 1040ez form instructions Income From Debt-Financed Property Investment income that would otherwise be excluded from an exempt organization's unrelated business taxable income (see Exclusions under Income earlier) must be included to the extent it is derived from debt-financed property. 1040ez form instructions The amount of income included is proportionate to the debt on the property. 1040ez form instructions Debt-Financed Property In general, the term “debt-financed property” means any property held to produce income (including gain from its disposition) for which there is an acquisition indebtedness at any time during the tax year (or during the 12-month period before the date of the property's disposal, if it was disposed of during the tax year). 1040ez form instructions It includes rental real estate, tangible personal property, and corporate stock. 1040ez form instructions Acquisition Indebtedness For any debt-financed property, acquisition indebtedness is the unpaid amount of debt incurred by an organization: When acquiring or improving the property, Before acquiring or improving the property if the debt would not have been incurred except for the acquisition or improvement, and After acquiring or improving the property if: The debt would not have been incurred except for the acquisition or improvement, and Incurring the debt was reasonably foreseeable when the property was acquired or improved. 1040ez form instructions The facts and circumstances of each situation determine whether incurring a debt was reasonably foreseeable. 1040ez form instructions That an organization may not have foreseen the need to incur a debt before acquiring or improving the property does not necessarily mean that incurring the debt later was not reasonably foreseeable. 1040ez form instructions Example 1. 1040ez form instructions Y, an exempt scientific organization, mortgages its laboratory to replace working capital used in remodeling an office building that Y rents to an insurance company for nonexempt purposes. 1040ez form instructions The debt is acquisition indebtedness since the debt, though incurred after the improvement of the office building, would not have been incurred without the improvement, and the debt was reasonably foreseeable when, to make the improvement, Y reduced its working capital below the amount necessary to continue current operations. 1040ez form instructions Example 2. 1040ez form instructions X, an exempt organization, forms a partnership with A and B. 1040ez form instructions The partnership agreement provides that all three partners will share equally in the profits of the partnership, each will invest $3 million, and X will be a limited partner. 1040ez form instructions X invests $1 million of its own funds in the partnership and $2 million of borrowed funds. 1040ez form instructions The partnership buys as its sole asset an office building that it leases to the public for nonexempt purposes. 1040ez form instructions The office building costs the partnership $24 million, of which $15 million is borrowed from Y bank. 1040ez form instructions The loan is secured by a mortgage on the entire office building. 1040ez form instructions By agreement with Y bank, X is not personally liable for payment of the mortgage. 1040ez form instructions X has acquisition indebtedness of $7 million. 1040ez form instructions This amount is the $2 million debt X incurred in acquiring the partnership interest, plus the $5 million that is X's allocable part of the partnership's debt incurred to buy the office building (one-third of $15 million). 1040ez form instructions Example 3. 1040ez form instructions A labor union advanced funds, from existing resources and without any borrowing, to its tax-exempt subsidiary title-holding company. 1040ez form instructions The subsidiary used the funds to pay a debt owed to a third party that was previously incurred in acquiring two income-producing office buildings. 1040ez form instructions Neither the union nor the subsidiary has incurred any further debt in acquiring or improving the property. 1040ez form instructions The union has no outstanding debt on the property. 1040ez form instructions The subsidiary's debt to the union is represented by a demand note on which the subsidiary makes payments whenever it has the available cash. 1040ez form instructions The books of the union and the subsidiary list the outstanding debt as interorganizational indebtedness. 1040ez form instructions Although the subsidiary's books show a debt to the union, it is not the type subject to the debt-financed property rules. 1040ez form instructions In this situation, the very nature of the title-holding company and the parent-subsidiary relationship shows this debt to be merely a matter of accounting between the two organizations. 1040ez form instructions Accordingly, the debt is not acquisition indebtedness. 1040ez form instructions Change in use of property. 1040ez form instructions   If an organization converts property that is not debt-financed property to a use that results in its treatment as debt-financed property, the outstanding principal debt on the property is thereafter treated as acquisition indebtedness. 1040ez form instructions Example. 1040ez form instructions Four years ago a university borrowed funds to acquire an apartment building as housing for married students. 1040ez form instructions Last year, the university rented the apartment building to the public for nonexempt purposes. 1040ez form instructions The outstanding principal debt becomes acquisition indebtedness as of the time the building was first rented to the public. 1040ez form instructions Continued debt. 1040ez form instructions   If an organization sells property and, without paying off debt that would be acquisition indebtedness if the property were debt-financed property, buys property that is otherwise debt-financed property, the unpaid debt is acquisition indebtedness for the new property. 1040ez form instructions This is true even if the original property was not debt-financed property. 1040ez form instructions Example. 1040ez form instructions To house its administration offices, an exempt organization bought a building using $600,000 of its own funds and $400,000 of borrowed funds secured by a pledge of its securities. 1040ez form instructions The office building was not debt-financed property. 1040ez form instructions The organization later sold the building for $1 million without repaying the $400,000 loan. 1040ez form instructions It used the sale proceeds to buy an apartment building it rents to the general public. 1040ez form instructions The unpaid debt of $400,000 is acquisition indebtedness with respect to the apartment building. 1040ez form instructions Property acquired subject to mortgage or lien. 1040ez form instructions   If property (other than certain gifts, bequests, and devises) is acquired subject to a mortgage, the outstanding principal debt secured by that mortgage is treated as acquisition indebtedness even if the organization did not assume or agree to pay the debt. 1040ez form instructions Example. 1040ez form instructions An exempt organization paid $50,000 for real property valued at $150,000 and subject to a $100,000 mortgage. 1040ez form instructions The $100,000 of outstanding principal debt is acquisition indebtedness, as though the organization had borrowed $100,000 to buy the property. 1040ez form instructions Liens similar to a mortgage. 1040ez form instructions   In determining acquisition indebtedness, a lien similar to a mortgage is treated as a mortgage. 1040ez form instructions A lien is similar to a mortgage if title to property is encumbered by the lien for a creditor's benefit. 1040ez form instructions However, when state law provides that a lien for taxes or assessments attaches to property before the taxes or assessments become due and payable, the lien is not treated as a mortgage until after the taxes or assessments have become due and payable and the organization has had an opportunity to pay the lien in accordance with state law. 1040ez form instructions Liens similar to mortgages include (but are not limited to): Deeds of trust, Conditional sales contracts, Chattel mortgages, Security interests under the Uniform Commercial Code, Pledges, Agreements to hold title in escrow, and Liens for taxes or assessments (other than those discussed earlier in this paragraph). 1040ez form instructions Exception for property acquired by gift, bequest, or devise. 1040ez form instructions   If property subject to a mortgage is acquired by gift, bequest, or devise, the outstanding principal debt secured by the mortgage is not treated as acquisition indebtedness during the 10-year period following the date the organization receives the property. 1040ez form instructions However, this applies to a gift of property only if:    The mortgage was placed on the property more than 5 years before the date the organization received it, and The donor held the property for more than 5 years before the date the organization received it. 1040ez form instructions   This exception does not apply if an organization assumes and agrees to pay all or part of the debt secured by the mortgage or makes any payment for the equity in the property owned by the donor or decedent (other than a payment under an annuity obligation excluded from the definition of acquisition indebtedness, discussed under Debt That Is Not Acquisition Indebtedness, later). 1040ez form instructions   Whether an organization has assumed and agreed to pay all or part of a debt in order to acquire the property is determined by the facts and circumstances of each situation. 1040ez form instructions Modifying existing debt. 1040ez form instructions   Extending, renewing, or refinancing an existing debt is considered a continuation of that debt to the extent its outstanding principal does not increase. 1040ez form instructions When the principal of the modified debt is more than the outstanding principal of the old debt, the excess is treated as a separate debt. 1040ez form instructions Extension or renewal. 1040ez form instructions   In general, any modification or substitution of the terms of a debt by an organization is considered an extension or renewal of the original debt, rather than the start of a new one, to the extent that the outstanding principal of the debt does not increase. 1040ez form instructions   The following are examples of acts resulting in the extension or renewal of a debt: Substituting liens to secure the debt, Substituting obligees whether or not with the organization's consent, Renewing, extending, or accelerating the payment terms of the debt, and Adding, deleting, or substituting sureties or other primary or secondary obligors. 1040ez form instructions Debt increase. 1040ez form instructions   If the outstanding principal of a modified debt is more than that of the unmodified debt, and only part of the refinanced debt is acquisition indebtedness, the payments on the refinanced debt must be allocated between the old debt and the excess. 1040ez form instructions Example. 1040ez form instructions An organization has an outstanding principal debt of $500,000 that is treated as acquisition indebtedness. 1040ez form instructions The organization borrows another $100,000, which is not acquisition indebtedness, from the same lender, resulting in a $600,000 note for the total obligation. 1040ez form instructions A payment of $60,000 on the total obligation would reduce the acquisition indebtedness by $50,000 ($60,000 x $500,000/$600,000) and the excess debt by $10,000. 1040ez form instructions Debt That Is Not Acquisition Indebtedness Certain debt and obligations are not acquisition indebtedness. 1040ez form instructions These include the following. 1040ez form instructions Debts incurred in performing an exempt purpose. 1040ez form instructions Annuity obligations. 1040ez form instructions Securities loans. 1040ez form instructions Real property debts of qualified organizations. 1040ez form instructions Certain Federal financing. 1040ez form instructions Debt incurred in performing exempt purpose. 1040ez form instructions   A debt incurred in performing an exempt purpose is not acquisition indebtedness. 1040ez form instructions For example, acquisition indebtedness does not include the debt an exempt credit union incurs in accepting deposits from its members or the debt an exempt organization incurs in accepting payments from its members to provide them with insurance, retirement, or other benefits. 1040ez form instructions Annuity obligation. 1040ez form instructions   The organization's obligation to pay an annuity is not acquisition indebtedness if the annuity meets all the following requirements. 1040ez form instructions It must be the sole consideration (other than a mortgage on property acquired by gift, bequest, or devise that meets the exception discussed under Property acquired subject to mortgage or lien, earlier in this chapter) issued in exchange for the property received. 1040ez form instructions Its present value, at the time of exchange, must be less than 90% of the value of the prior owner's equity in the property received. 1040ez form instructions It must be payable over the lives of either one or two individuals living when issued. 1040ez form instructions It must be payable under a contract that: Does not guarantee a minimum nor specify a maximum number of payments, and Does not provide for any adjustment of the amount of the annuity payments based on the income received from the transferred property or any other property. 1040ez form instructions Example. 1040ez form instructions X, an exempt organization, receives property valued at $100,000 from donor A, a male age 60. 1040ez form instructions In return X promises to pay A $6,000 a year for the rest of A's life, with neither a minimum nor maximum number of payments specified. 1040ez form instructions The amounts paid under the annuity are not dependent on the income derived from the property transferred to X. 1040ez form instructions The present value of this annuity is $81,156, determined from IRS valuation tables. 1040ez form instructions Since the value of the annuity is less than 90 percent of A's $100,000 equity in the property transferred and the annuity meets all the other requirements just discussed, the obligation to make annuity payments is not acquisition indebtedness. 1040ez form instructions Securities loans. 1040ez form instructions   Acquisition indebtedness does not include an obligation of the exempt organization to return collateral security provided by the borrower of the exempt organization's securities under a securities loan agreement (discussed under Exclusions earlier in this chapter). 1040ez form instructions This transaction is not treated as the borrowing by the exempt organization of the collateral furnished by the borrower (usually a broker) of the securities. 1040ez form instructions   However, if the exempt organization incurred debt to buy the loaned securities, any income from the securities (including income from
Español

Better Business Bureaus (BBBs) are nonprofit organizations that encourage honest advertising and selling practices and are supported primarily by local businesses. They offer a variety of consumer services, including consumer education materials; business reports, particularly unanswered or unsettled complaints or other problems; mediation and arbitration services; and information about charities and other organizations that are seeking public donations. They also provide ratings (A, B, C, D, or F) of local companies to express the BBB's confidence that the company operates in a trustworthy manner and demonstrates a willingness to resolve customer concerns.

Wichita, KS

Website: Better Business Bureau

Email: info@kansasplains.bbb.org

Address: Better Business Bureau
345 N. Riverview St., Suite 720
Wichita, KS 67203

Phone Number: 316-263-3146

Toll-free: 1-800-856-2417

The 1040ez Form Instructions

1040ez form instructions Index A Addition to property, Additions and Improvements Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS) Recovery periods, Recovery Periods Under ADS Required use, Required use of ADS. 1040ez form instructions Amended return, Filing an Amended Return Apartment Cooperative, Cooperative apartments. 1040ez form instructions Rental, Which Property Class Applies Under GDS? Automobile (see Passenger automobile) B Basis Adjustments, Basis adjustment for depreciation allowed or allowable. 1040ez form instructions , Adjustment of partner's basis in partnership. 1040ez form instructions , Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 1040ez form instructions , Basis adjustment due to casualty loss. 1040ez form instructions Basis for depreciation, What Is the Basis for Depreciation? Casualty loss, Basis adjustment due to casualty loss. 1040ez form instructions Change in use, Property changed from personal use. 1040ez form instructions Cost, Cost as Basis Depreciable basis, Depreciable basis. 1040ez form instructions Other than cost, Other Basis Recapture of clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 1040ez form instructions Term interest, Basis adjustments. 1040ez form instructions Unadjusted, Figuring the Unadjusted Basis of Your Property Business use of property, partial, Partial business or investment use. 1040ez form instructions Business-use limit, recapture of Section 179 deduction, When Must You Recapture the Deduction? Business-use requirement, listed property, What Is the Business-Use Requirement? C Car (see Passenger automobile) Carryover of section 179 deduction, Carryover of disallowed deduction. 1040ez form instructions Casualty loss, effect of, Basis adjustment due to casualty loss. 1040ez form instructions Changing accounting method, Changing Your Accounting Method Communication equipment (see Listed property) Commuting, Commuting use. 1040ez form instructions Computer (see Listed property) Computer software, Computer software. 1040ez form instructions , Off-the-shelf computer software. 1040ez form instructions Containers, Containers. 1040ez form instructions Conventions, Which Convention Applies? Cooperative apartment, Cooperative apartments. 1040ez form instructions Copyright, Patents and copyrights. 1040ez form instructions (see also Section 197 intangibles) Correcting depreciation deductions, How Do You Correct Depreciation Deductions? Cost basis, Cost as Basis D Declining balance Method, Declining Balance Method Rates, Declining balance rate. 1040ez form instructions Deduction limit Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Depreciation Deduction Employee, Can Employees Claim a Deduction? Listed property, Can Employees Claim a Deduction? Determinable useful life, Property Having a Determinable Useful Life Excepted property, Excepted Property Incorrect amount deducted, How Do You Correct Depreciation Deductions? Methods, Which Depreciation Method Applies? Property lasting more than one year, Property Lasting More Than One Year Property owned, Property You Own Property used in business, Property Used in Your Business or Income-Producing Activity Recapture, Revoking an election. 1040ez form instructions , Recapture of Excess Depreciation Depreciation allowable, Basis adjustment for depreciation allowed or allowable. 1040ez form instructions Depreciation allowed, Basis adjustment for depreciation allowed or allowable. 1040ez form instructions Depreciation deduction Listed property, What Is the Business-Use Requirement? Determinable useful life, Property Having a Determinable Useful Life Disposition Before recovery period ends, Sale or Other Disposition Before the Recovery Period Ends General asset account property, Disposing of GAA Property Section 179 deduction, When Must You Recapture the Deduction? E Election ADS, Electing ADS. 1040ez form instructions , Election of ADS. 1040ez form instructions Declining balance (150% DB) method, 150% election. 1040ez form instructions Exclusion from MACRS, Election To Exclude Property From MACRS General asset account, Electing To Use a GAA Not to claim special depreciation allowance, How Can You Elect Not To Claim an Allowance? Section 179 deduction, How Do You Elect the Deduction? Straight line method, Straight line election. 1040ez form instructions Electric vehicle, Electric Vehicles Employee Depreciation deduction, Can Employees Claim a Deduction? How to claim depreciation, Employee. 1040ez form instructions Employee deduction, listed property, Can Employees Claim a Deduction? Energy property, Energy property. 1040ez form instructions Exchange of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion F Farm Property, Depreciation Methods for Farm Property Figuring MACRS Using percentage tables, How Is the Depreciation Deduction Figured? Without using percentage tables, Figuring the Deduction Without Using the Tables Films, Films, video tapes, and recordings. 1040ez form instructions Free tax services, Free help with your tax return. 1040ez form instructions G General asset account Abusive transaction, Abusive transactions. 1040ez form instructions Disposing of property, Disposing of GAA Property Grouping property in, Grouping Property Nonrecognition transaction, Nonrecognition transactions. 1040ez form instructions General Depreciation System (GDS), recovery periods, Recovery Periods Under GDS Gift (see Basis, other than cost) H Help (see Tax help) I Idle property, Idle Property Improvements, How Do You Treat Repairs and Improvements?, Additions and Improvements Income forecast method, Income Forecast Method Incorrect depreciation deductions, How Do You Correct Depreciation Deductions? Indian reservation Defined, Indian reservation. 1040ez form instructions Qualified infrastructure property, Qualified infrastructure property. 1040ez form instructions Qualified property, Qualified property. 1040ez form instructions Recovery periods for qualified property, Indian Reservation Property Related person, Related person. 1040ez form instructions Inheritance (see Basis, other than cost) Intangible property Depreciation method, Intangible Property, Income Forecast Method Income forecast method, Income Forecast Method Straight line method, Intangible Property Inventory, Inventory. 1040ez form instructions Investment use of property, partial, Partial business or investment use. 1040ez form instructions Involuntary conversion of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion L Land Not depreciable, Land Preparation costs, Land Leased property, Leased property. 1040ez form instructions Leasehold improvement property, defined, Qualified leasehold improvement property. 1040ez form instructions , Qualified leasehold improvement property. 1040ez form instructions Life tenant, Life tenant. 1040ez form instructions (see also Term interests) Limit on deduction Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Listed property 5% owner, 5% owner. 1040ez form instructions Computer, Computers and Related Peripheral Equipment Condition of employment, Condition of employment. 1040ez form instructions Defined, What Is Listed Property? Employee deduction, Can Employees Claim a Deduction? Employer convenience, Employer's convenience. 1040ez form instructions Improvements to, Improvements to listed property. 1040ez form instructions Leased, Lessee's Inclusion Amount Passenger automobile, Passenger Automobiles Qualified business use, Qualified Business Use Recordkeeping, Adequate Records Related person, Related persons. 1040ez form instructions Reporting on Form 4562, How Is Listed Property Information Reported? Lodging, Property used for lodging. 1040ez form instructions M Maximum deduction Electric vehicles, Electric Vehicles Passenger automobiles, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Mobile home (see Residential rental property) Modified ACRS (MACRS) Addition or improvement, Additions and Improvements Alternative Depreciation System (ADS), Which Depreciation System (GDS or ADS) Applies? Conventions, Which Convention Applies? Declining balance method, Declining Balance Method Depreciation methods, Which Depreciation Method Applies? Farm property, Depreciation Methods for Farm Property Figuring, short tax year, Property Placed in Service in a Short Tax Year General Depreciation System (GDS), Which Depreciation System (GDS or ADS) Applies? Percentage tables, Using the MACRS Percentage Tables Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? Short tax year, Figuring the Deduction for a Short Tax Year Straight line method, Straight Line Method N Nonresidential real property, Which Property Class Applies Under GDS? Nontaxable transfer of MACRS property, Property Acquired in a Nontaxable Transfer O Office in the home, Office in the home. 1040ez form instructions , Office in the home. 1040ez form instructions Ownership, incidents of, Incidents of ownership. 1040ez form instructions P Partial business use, Partial business use. 1040ez form instructions Passenger automobile Defined, Passenger Automobiles Electric vehicles, Electric Vehicles Limit on, Do the Passenger Automobile Limits Apply? Maximum depreciation deduction, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Patent, Patents and copyrights. 1040ez form instructions (see also Section 197 intangibles) Personal property, Personal property. 1040ez form instructions Phonographic equipment (see Listed property) Photographic equipment (see Listed property) Placed in service Before 1987, Property You Placed in Service Before 1987 Date, What Is the Placed in Service Date? Rule, Placed in Service Property Classes, Which Property Class Applies Under GDS? Depreciable, What Property Can Be Depreciated? Idle, Idle Property Improvements, How Do You Treat Repairs and Improvements? Leased, Leased property. 1040ez form instructions , Leased property. 1040ez form instructions Listed, What Is Listed Property? Personal, Personal property. 1040ez form instructions Real, Real property. 1040ez form instructions Retired from service, Retired From Service Tangible personal, Tangible personal property. 1040ez form instructions Term interest, Certain term interests in property. 1040ez form instructions Q Qualified leasehold improvement property, defined, Qualified leasehold improvement property. 1040ez form instructions , Qualified leasehold improvement property. 1040ez form instructions Qualified property, special depreciation allowance, What Is Qualified Property? R Real property, Real property. 1040ez form instructions Recapture Clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 1040ez form instructions General asset account, abusive transaction, Abusive transactions. 1040ez form instructions Listed property, Recapture of Excess Depreciation MACRS depreciation, Revoking an election. 1040ez form instructions Section 179 deduction, When Must You Recapture the Deduction? Special depreciation allowance, When Must You Recapture an Allowance? Recordkeeping Listed property, Adequate Records Section 179, How Do You Elect the Deduction? Recovery periods ADS, Recovery Periods Under ADS GDS, Recovery Periods Under GDS Related persons, Related persons. 1040ez form instructions , Related persons. 1040ez form instructions , Related persons. 1040ez form instructions , Related persons. 1040ez form instructions , Related person. 1040ez form instructions , Related persons. 1040ez form instructions Rent-to-own property, defined, Qualified rent-to-own property. 1040ez form instructions Rental home (see Residential rental property) Rented property, improvements, Improvements to rented property. 1040ez form instructions Repairs, How Do You Treat Repairs and Improvements? Residential rental property, Which Property Class Applies Under GDS? Retail motor fuels outlet, Retail motor fuels outlet. 1040ez form instructions Revoking ADS election, Electing ADS. 1040ez form instructions General asset account election, Revoking an election. 1040ez form instructions Section 179 election, Revoking an election. 1040ez form instructions S Sale of property, Sale or Other Disposition Before the Recovery Period Ends Section 179 deduction Business use required, Partial business use. 1040ez form instructions Carryover, Carryover of disallowed deduction. 1040ez form instructions Dispositions, When Must You Recapture the Deduction? Electing, How Do You Elect the Deduction? Limits Business (taxable) income, Business Income Limit Business-use, recapture, When Must You Recapture the Deduction? Dollar, Dollar Limits Enterprise zone business, Enterprise Zone Businesses Partial business use, Partial business use. 1040ez form instructions Married filing separate returns, Married Individuals Partnership rules, Partnerships and Partners Property Eligible, Eligible Property Excepted, Excepted Property Purchase required, Property Acquired by Purchase Recapture, When Must You Recapture the Deduction? Recordkeeping, How Do You Elect the Deduction? S corporation rules, S Corporations Settlement fees, Settlement costs. 1040ez form instructions Short tax year Figuring depreciation, Property Placed in Service in a Short Tax Year Figuring placed-in-service date, Using the Applicable Convention in a Short Tax Year Software, computer, Computer software. 1040ez form instructions , Off-the-shelf computer software. 1040ez form instructions Sound recording, Films, video tapes, and recordings. 1040ez form instructions Special depreciation allowance Election not to claim, How Can You Elect Not To Claim an Allowance? Qualified property, What Is Qualified Property? Recapture, When Must You Recapture an Allowance? Stock, constructive ownership of, Constructive ownership of stock or partnership interest. 1040ez form instructions Straight line method, Intangible Property, Straight Line Method Created intangibles, Certain created intangibles. 1040ez form instructions T Tangible personal property, Tangible personal property. 1040ez form instructions Term interest, Certain term interests in property. 1040ez form instructions Trade-in of property, Trade-in of other property. 1040ez form instructions Trucks, Trucks and Vans U Unadjusted basis, Figuring the Unadjusted Basis of Your Property Useful life, Property Having a Determinable Useful Life V Vans, Trucks and Vans Video tape, Films, video tapes, and recordings. 1040ez form instructions Video-recording equipment (see Listed property) W When to use ADS, Which Depreciation System (GDS or ADS) Applies? Worksheet Leased listed property, Inclusion amount worksheet. 1040ez form instructions MACRS, MACRS Worksheet Prev  Up     Home   More Online Publications