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1040ez Forms And Instructions

1040ez BookletIrs E File ExtensionFreefilefillableforms Com1040 Easy FormH And R Block FreeFile Free State Tax Return OnlineFederal 1040ez 20131040zAmended FormsFree Hr BlockAmend Prior Years TaxesState Tax Return Free FilingIrs State Tax Forms 2013Free Tax Preparation ServicesHow To File A Tax AmendmentAmend Tax Return 2013Hr Block Free Tax ReturnIrs Amended Return FormFree State Tax Software1040ez Irs GovHow Can I File State Taxes For FreeH&r Block TaxcutHow Do You Amend Your TaxesIrs Gov 2012 Tax FormsIrs Forms 1040Free File Fillable FormsFree Tax Filing Online2011 Federal Income Tax Form 1040ezIrs Amendment FormFile An Amended Tax Return OnlineFiling A Tax ExtentionH7r Block Free File2008 Tax Forms 1040Irs Forms For 2012Turbotax Free State FilingAmended Tax Return Forms1040 Ez Form 2011Federal Tax Forms 1040 Ez2012 1040ez Tax FormFile 2010 Taxes For Free

1040ez Forms And Instructions

1040ez forms and instructions Publication 526 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. 1040ez forms and instructions Tax questions. 1040ez forms and instructions Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 526 (such as legislation enacted after we release it), go to www. 1040ez forms and instructions irs. 1040ez forms and instructions gov/pub526. 1040ez forms and instructions What's New Limit on itemized deductions. 1040ez forms and instructions  For 2013, you may have to reduce the total amount of certain itemized deductions, including charitable contributions, if your adjusted gross income is more than: $150,000 if married filing separately, $250,000 if single, $275,000 if head of household, or $300,000 if married filing jointly or qualifying widow(er). 1040ez forms and instructions For more information and a worksheet, see the instructions for Schedule A (Form 1040). 1040ez forms and instructions Reminders Disaster relief. 1040ez forms and instructions  You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization (defined under Organizations That Qualify To Receive Deductible Contributions ). 1040ez forms and instructions However, you cannot deduct contributions earmarked for relief of a particular individual or family. 1040ez forms and instructions Publication 3833, Disaster Relief: Providing Assistance through Charitable Organizations, has more information about disaster relief, including how to establish a new charitable organization. 1040ez forms and instructions You can also find more information on IRS. 1040ez forms and instructions gov. 1040ez forms and instructions Enter “disaster relief” in the search box. 1040ez forms and instructions Photographs of missing children. 1040ez forms and instructions  The IRS is a proud partner with the National Center for Missing and Exploited Children. 1040ez forms and instructions Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040ez forms and instructions You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040ez forms and instructions Introduction This publication explains how to claim a deduction for your charitable contributions. 1040ez forms and instructions It discusses the types of organizations to which you can make deductible charitable contributions and the types of contributions you can deduct. 1040ez forms and instructions It also discusses how much you can deduct, what records you must keep, and how to report charitable contributions. 1040ez forms and instructions A charitable contribution is a donation or gift to, or for the use of, a qualified organization. 1040ez forms and instructions It is voluntary and is made without getting, or expecting to get, anything of equal value. 1040ez forms and instructions Qualified organizations. 1040ez forms and instructions   Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. 1040ez forms and instructions You will find descriptions of these organizations under Organizations That Qualify To Receive Deductible Contributions . 1040ez forms and instructions Form 1040 required. 1040ez forms and instructions   To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A (Form 1040). 1040ez forms and instructions The amount of your deduction may be limited if certain rules and limits explained in this publication apply to you. 1040ez forms and instructions Comments and suggestions. 1040ez forms and instructions   We welcome your comments about this publication and your suggestions for future editions. 1040ez forms and instructions   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040ez forms and instructions NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040ez forms and instructions Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040ez forms and instructions   You can send your comments from www. 1040ez forms and instructions irs. 1040ez forms and instructions gov/formspubs/. 1040ez forms and instructions Click on “More Information” and then on “Comment on Tax Forms and Publications. 1040ez forms and instructions ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040ez forms and instructions Ordering forms and publications. 1040ez forms and instructions   Visit www. 1040ez forms and instructions irs. 1040ez forms and instructions gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 1040ez forms and instructions Internal Revenue Service 1201 N. 1040ez forms and instructions Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 1040ez forms and instructions   If you have a tax question, check the information available on IRS. 1040ez forms and instructions gov or call 1-800-829-1040. 1040ez forms and instructions We cannot answer tax questions sent to either of the above addresses. 1040ez forms and instructions Useful Items - You may want to see: Publication 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions  See How To Get Tax Help near the end of this publication for information about getting these publications and forms. 1040ez forms and instructions Table 1. 1040ez forms and instructions Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. 1040ez forms and instructions See the rest of this publication for more information and additional rules and limits that may apply. 1040ez forms and instructions Deductible As Charitable Contributions Not Deductible As Charitable Contributions Money or property you give to: Money or property you give to: Churches, synagogues, temples, mosques, and other religious organizations  Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)  Nonprofit schools and hospitals  The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. 1040ez forms and instructions   War veterans' groups    Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Civic leagues, social and sports clubs, labor unions, and chambers of commerce  Foreign organizations (except certain Canadian, Israeli, and Mexican charities)  Groups that are run for personal profit  Groups whose purpose is to lobby for law changes  Homeowners' associations  Individuals  Political groups or candidates for public office    Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank   Prev  Up  Next   Home   More Online Publications
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Requirements for Tax Return Preparers: Frequently Asked Questions

 

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The 1040ez Forms And Instructions

1040ez forms and instructions 2. 1040ez forms and instructions   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. 1040ez forms and instructions Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. 1040ez forms and instructions S. 1040ez forms and instructions or foreign source income. 1040ez forms and instructions This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. 1040ez forms and instructions S. 1040ez forms and instructions Virgin Islands (USVI). 1040ez forms and instructions Generally, the same rules that apply for determining U. 1040ez forms and instructions S. 1040ez forms and instructions source income also apply for determining possession source income. 1040ez forms and instructions However, there are some important exceptions to these rules. 1040ez forms and instructions Both the general rules and the exceptions are discussed in this chapter. 1040ez forms and instructions U. 1040ez forms and instructions S. 1040ez forms and instructions income rule. 1040ez forms and instructions   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. 1040ez forms and instructions Table 2-1 shows the general rules for determining whether income is from sources within the United States. 1040ez forms and instructions Table 2-1. 1040ez forms and instructions General Rules for Determining U. 1040ez forms and instructions S. 1040ez forms and instructions Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 1040ez forms and instructions Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. 1040ez forms and instructions For more information, see Regulations section 1. 1040ez forms and instructions 863-1(b). 1040ez forms and instructions Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. 1040ez forms and instructions Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. 1040ez forms and instructions Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. 1040ez forms and instructions It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. 1040ez forms and instructions Services performed wholly within a relevant possession. 1040ez forms and instructions   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. 1040ez forms and instructions However, there is an exception for income earned as a member of the U. 1040ez forms and instructions S. 1040ez forms and instructions Armed Forces or a civilian spouse. 1040ez forms and instructions U. 1040ez forms and instructions S. 1040ez forms and instructions Armed Forces. 1040ez forms and instructions   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. 1040ez forms and instructions However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. 1040ez forms and instructions Civilian spouse of active duty member of the U. 1040ez forms and instructions S. 1040ez forms and instructions Armed Forces. 1040ez forms and instructions   If you are a bona fide resident of a U. 1040ez forms and instructions S. 1040ez forms and instructions possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. 1040ez forms and instructions Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. 1040ez forms and instructions S. 1040ez forms and instructions possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. 1040ez forms and instructions Services performed partly inside and partly outside a relevant possession. 1040ez forms and instructions   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. 1040ez forms and instructions Compensation (other than certain fringe benefits) is sourced on a time basis. 1040ez forms and instructions Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 1040ez forms and instructions   Or, you may be permitted to use an alternative basis to determine the source of compensation. 1040ez forms and instructions See Alternative basis , later. 1040ez forms and instructions   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 1040ez forms and instructions In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 1040ez forms and instructions Time basis. 1040ez forms and instructions   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). 1040ez forms and instructions Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. 1040ez forms and instructions The time period for which the income is made does not have to be a year. 1040ez forms and instructions Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. 1040ez forms and instructions Example. 1040ez forms and instructions In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. 1040ez forms and instructions Your Puerto Rico source income is $60,000, figured as follows. 1040ez forms and instructions       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. 1040ez forms and instructions   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 1040ez forms and instructions Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. 1040ez forms and instructions You determine the period to which the income is attributable based on the facts and circumstances of your case. 1040ez forms and instructions For more information on multi-year compensation, see Treasury Decision (T. 1040ez forms and instructions D. 1040ez forms and instructions ) 9212 and Regulations section 1. 1040ez forms and instructions 861-4, 2005-35 I. 1040ez forms and instructions R. 1040ez forms and instructions B. 1040ez forms and instructions 429, available at www. 1040ez forms and instructions irs. 1040ez forms and instructions gov/irb/2005-35_IRB/ar14. 1040ez forms and instructions html. 1040ez forms and instructions Certain fringe benefits sourced on a geographical basis. 1040ez forms and instructions   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. 1040ez forms and instructions Housing. 1040ez forms and instructions Education. 1040ez forms and instructions Local transportation. 1040ez forms and instructions Tax reimbursement. 1040ez forms and instructions Hazardous or hardship duty pay. 1040ez forms and instructions Moving expense reimbursement. 1040ez forms and instructions For information on determining the source of the fringe benefits listed above, see Regulations section 1. 1040ez forms and instructions 861-4. 1040ez forms and instructions Alternative basis. 1040ez forms and instructions   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. 1040ez forms and instructions If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. 1040ez forms and instructions De minimis exception. 1040ez forms and instructions   There is an exception to the rule for determining the source of income earned in a possession. 1040ez forms and instructions Generally, you will not have income from a possession if during a tax year you: Are a U. 1040ez forms and instructions S. 1040ez forms and instructions citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. 1040ez forms and instructions This exception began with income earned during your 2008 tax year. 1040ez forms and instructions Pensions. 1040ez forms and instructions   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. 1040ez forms and instructions The contribution portion is sourced according to where services were performed that earned the pension. 1040ez forms and instructions The investment earnings portion is sourced according to the location of the pension trust. 1040ez forms and instructions Example. 1040ez forms and instructions You are a U. 1040ez forms and instructions S. 1040ez forms and instructions citizen who worked in Puerto Rico for a U. 1040ez forms and instructions S. 1040ez forms and instructions company. 1040ez forms and instructions All services were performed in Puerto Rico. 1040ez forms and instructions Upon retirement you remained in Puerto Rico and began receiving your pension from the U. 1040ez forms and instructions S. 1040ez forms and instructions pension trust of your employer. 1040ez forms and instructions Distributions from the U. 1040ez forms and instructions S. 1040ez forms and instructions pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. 1040ez forms and instructions S. 1040ez forms and instructions source income. 1040ez forms and instructions Investment Income This category includes such income as interest, dividends, rents, and royalties. 1040ez forms and instructions Interest income. 1040ez forms and instructions   The source of interest income is generally determined by the residence of the payer. 1040ez forms and instructions Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. 1040ez forms and instructions   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. 1040ez forms and instructions See Regulations section 1. 1040ez forms and instructions 937-2(i) for more information. 1040ez forms and instructions Dividends. 1040ez forms and instructions   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. 1040ez forms and instructions There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. 1040ez forms and instructions For more information, see Regulations section 1. 1040ez forms and instructions 937-2(g). 1040ez forms and instructions Rental income. 1040ez forms and instructions   Rents from property located in a relevant possession are treated as income from sources within that possession. 1040ez forms and instructions Royalties. 1040ez forms and instructions   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. 1040ez forms and instructions   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. 1040ez forms and instructions Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. 1040ez forms and instructions The most common situations are discussed below. 1040ez forms and instructions Real property. 1040ez forms and instructions   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. 1040ez forms and instructions The location of the property generally determines the source of income from the sale. 1040ez forms and instructions For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. 1040ez forms and instructions If, however, the home you sold was located in the United States, the gain is U. 1040ez forms and instructions S. 1040ez forms and instructions source income. 1040ez forms and instructions Personal property. 1040ez forms and instructions   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. 1040ez forms and instructions Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. 1040ez forms and instructions If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. 1040ez forms and instructions   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. 1040ez forms and instructions The rules applying to sales of inventory are discussed below. 1040ez forms and instructions For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. 1040ez forms and instructions Inventory. 1040ez forms and instructions   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. 1040ez forms and instructions The source of income from the sale of inventory depends on whether the inventory was purchased or produced. 1040ez forms and instructions Purchased. 1040ez forms and instructions   Income from the sale of inventory that you purchased is sourced where you sell the property. 1040ez forms and instructions Generally, this is where title to the property passes to the buyer. 1040ez forms and instructions Produced. 1040ez forms and instructions   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. 1040ez forms and instructions For information on making the allocation, see Regulations section 1. 1040ez forms and instructions 863-3(f). 1040ez forms and instructions Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. 1040ez forms and instructions S. 1040ez forms and instructions citizen or resident alien prior to becoming a bona fide resident of a possession. 1040ez forms and instructions You are subject to these special rules if you meet both of the following conditions. 1040ez forms and instructions For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. 1040ez forms and instructions For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). 1040ez forms and instructions If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. 1040ez forms and instructions Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. 1040ez forms and instructions S. 1040ez forms and instructions tax return. 1040ez forms and instructions (See chapter 3 for additional filing information. 1040ez forms and instructions ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. 1040ez forms and instructions These rules apply to dispositions after April 11, 2005. 1040ez forms and instructions For details, see Regulations section 1. 1040ez forms and instructions 937-2(f)(1) and Examples 1 and 2 of section 1. 1040ez forms and instructions 937-2(k). 1040ez forms and instructions Example 1. 1040ez forms and instructions In 2007, Cheryl Jones, a U. 1040ez forms and instructions S. 1040ez forms and instructions citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. 1040ez forms and instructions S. 1040ez forms and instructions corporation listed on the New York Stock Exchange. 1040ez forms and instructions On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. 1040ez forms and instructions Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. 1040ez forms and instructions On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. 1040ez forms and instructions On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. 1040ez forms and instructions Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. 1040ez forms and instructions The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. 1040ez forms and instructions This existing special rule applies if you are a U. 1040ez forms and instructions S. 1040ez forms and instructions citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. 1040ez forms and instructions S. 1040ez forms and instructions assets during the 10-year period beginning when you became a bona fide resident. 1040ez forms and instructions The gain is U. 1040ez forms and instructions S. 1040ez forms and instructions source income that generally is subject to U. 1040ez forms and instructions S. 1040ez forms and instructions tax if the property is either (1) located in the United States; (2) stock issued by a U. 1040ez forms and instructions S. 1040ez forms and instructions corporation or a debt obligation of a U. 1040ez forms and instructions S. 1040ez forms and instructions person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). 1040ez forms and instructions See chapter 3 for filing information. 1040ez forms and instructions Special election. 1040ez forms and instructions   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. 1040ez forms and instructions Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. 1040ez forms and instructions This election overrides both of the special rules discussed earlier. 1040ez forms and instructions   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. 1040ez forms and instructions Marketable securities. 1040ez forms and instructions   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. 1040ez forms and instructions Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. 1040ez forms and instructions S. 1040ez forms and instructions holding periods. 1040ez forms and instructions   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. 1040ez forms and instructions The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. 1040ez forms and instructions This is your gain (or loss) that is treated as being from sources within the relevant possession. 1040ez forms and instructions If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. 1040ez forms and instructions Example 2. 1040ez forms and instructions Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. 1040ez forms and instructions S. 1040ez forms and instructions and possession holding periods. 1040ez forms and instructions Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. 1040ez forms and instructions Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). 1040ez forms and instructions By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 1040ez forms and instructions Other personal property. 1040ez forms and instructions   For personal property other than marketable securities, use a time-based allocation. 1040ez forms and instructions Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. 1040ez forms and instructions      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. 1040ez forms and instructions Example 3. 1040ez forms and instructions In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. 1040ez forms and instructions On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. 1040ez forms and instructions On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. 1040ez forms and instructions She had owned the interest for a total of 1,720 days. 1040ez forms and instructions Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. 1040ez forms and instructions The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). 1040ez forms and instructions By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 1040ez forms and instructions Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. 1040ez forms and instructions Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. 1040ez forms and instructions These rules do not apply to amounts paid as salary or other compensation for services. 1040ez forms and instructions See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. 1040ez forms and instructions Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. 1040ez forms and instructions These circumstances are listed below. 1040ez forms and instructions You have an office or other fixed place of business in the relevant possession to which the income can be attributed. 1040ez forms and instructions That office or place of business is a material factor in producing the income. 1040ez forms and instructions The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 1040ez forms and instructions An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 1040ez forms and instructions The three kinds of income from sources outside the relevant possession to which these rules apply are the following. 1040ez forms and instructions Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. 1040ez forms and instructions Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. 1040ez forms and instructions Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. 1040ez forms and instructions Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 1040ez forms and instructions Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. 1040ez forms and instructions Example. 1040ez forms and instructions Marcy Jackson is a bona fide resident of American Samoa. 1040ez forms and instructions Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. 1040ez forms and instructions A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. 1040ez forms and instructions Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. 1040ez forms and instructions The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. 1040ez forms and instructions However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. 1040ez forms and instructions Prev  Up  Next   Home   More Online Publications