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1040ez Online Filing

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1040ez Online Filing

1040ez online filing 1. 1040ez online filing   Organizations Subject to the Tax Table of Contents The tax on unrelated business income applies to most organizations exempt from tax under section 501(a). 1040ez online filing These organizations include charitable, religious, scientific, and other organizations described in section 501(c), as well as employees' trusts forming part of pension, profit-sharing, and stock bonus plans described in section 401(a). 1040ez online filing In addition, the following are subject to the tax on unrelated business income. 1040ez online filing Individual retirement arrangements (IRAs), including traditional IRAs, Roth IRAs, Coverdell IRAs, simplified employee pensions (SEP-IRAs), and savings incentive match plans for employees (SIMPLE IRAs). 1040ez online filing State and municipal colleges and universities. 1040ez online filing Qualified state tuition programs. 1040ez online filing Medical savings accounts (MSAs) described in section 220(d). 1040ez online filing Coverdell savings accounts described in section 530. 1040ez online filing U. 1040ez online filing S. 1040ez online filing instrumentalities. 1040ez online filing   A corporation that is a U. 1040ez online filing S. 1040ez online filing instrumentality described in section 501(c)(1) is not subject to the tax on unrelated business income if the corporation is organized under an Act of Congress and, under the Act, is exempt from federal income taxes. 1040ez online filing Colleges and universities. 1040ez online filing   Colleges and universities that are agencies or instrumentalities of any government or any political subdivision of a government, or that are owned or operated by a government or political subdivision of a government, are subject to the tax on unrelated business income. 1040ez online filing As used here, the word government includes any foreign government (to the extent not contrary to a treaty) and all domestic governments (the United States and any of its possessions, any state, and the District of Columbia). 1040ez online filing   The tax is on the unrelated business income of both the universities and colleges themselves and on their wholly owned tax exempt subsidiary organizations. 1040ez online filing It is immaterial whether the business is conducted by the university or by a separately incorporated wholly owned subsidiary. 1040ez online filing If the business activity is unrelated, the income in both instances will be subject to the tax. 1040ez online filing If the primary purpose of a wholly owned subsidiary is to operate or conduct any unrelated trade or business (other than holding title to property and collecting income from it), the subsidiary is not an exempt organization, and this rule does not apply. 1040ez online filing Title-holding corporations. 1040ez online filing   When an exempt title-holding corporation, described in section 501(c)(2), pays any of its net income to an organization that itself is exempt from tax under section 501(a) (or would pay such an amount except that the expenses of collecting its income exceed the amount collected) and files a consolidated return with that organization, the title-holding corporation is treated, for unrelated business income tax purposes, as organized and operated for the same purposes as the exempt payee organization. 1040ez online filing   Thus, a title-holding corporation whose source of income is related to the exempt purposes of the payee organization is not subject to the unrelated business income tax if the holding corporation and the payee organization file a consolidated return. 1040ez online filing However, if the source of the income is not so related, the title-holding corporation is subject to unrelated business income tax. 1040ez online filing Example. 1040ez online filing X, a title-holding corporation, is required to distribute its net income to A, an exempt organization. 1040ez online filing During the tax year, X realizes net income of $900,000 from source M, which is related to A's exempt function. 1040ez online filing X also receives $100,000 from source N, which is not related to A's exempt function. 1040ez online filing X and A file a consolidated return for the tax year. 1040ez online filing X has unrelated business income of $100,000. 1040ez online filing Prev  Up  Next   Home   More Online Publications
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The 1040ez Online Filing

1040ez online filing 5. 1040ez online filing   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. 1040ez online filing Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. 1040ez online filing When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. 1040ez online filing Otherwise, these are capital expenses that must be added to the basis of the land. 1040ez online filing (See chapter 6 for information on determining basis. 1040ez online filing ) Conservation expenses for land in a foreign country do not qualify for this special treatment. 1040ez online filing The deduction for conservation expenses cannot be more than 25% of your gross income from farming. 1040ez online filing See 25% Limit on Deduction , later. 1040ez online filing Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. 1040ez online filing These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. 1040ez online filing You must include in income most government payments for approved conservation practices. 1040ez online filing However, you can exclude some payments you receive under certain cost-sharing conservation programs. 1040ez online filing For more information, see Agricultural Program Payments in chapter 3. 1040ez online filing To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. 1040ez online filing Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. 1040ez online filing You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. 1040ez online filing You are not farming if you are engaged only in forestry or the growing of timber. 1040ez online filing Farm defined. 1040ez online filing   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. 1040ez online filing It also includes plantations, ranches, ranges, and orchards. 1040ez online filing A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. 1040ez online filing It does not include an area where they are merely caught or harvested. 1040ez online filing A plant nursery is a farm for purposes of deducting soil and water conservation expenses. 1040ez online filing Farm rental. 1040ez online filing   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. 1040ez online filing If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. 1040ez online filing   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. 1040ez online filing Example. 1040ez online filing You own a farm in Iowa and live in California. 1040ez online filing You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. 1040ez online filing You cannot deduct your soil conservation expenses for this farm. 1040ez online filing You must capitalize the expenses and add them to the basis of the land. 1040ez online filing     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. 1040ez online filing Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. 1040ez online filing If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. 1040ez online filing Keep a copy of the plan with your books and records to support your deductions. 1040ez online filing Conservation plan. 1040ez online filing   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. 1040ez online filing There are three types of approved plans. 1040ez online filing NRCS individual site plans. 1040ez online filing These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. 1040ez online filing NRCS county plans. 1040ez online filing These plans include a listing of farm conservation practices approved for the county where the farmland is located. 1040ez online filing You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. 1040ez online filing Comparable state agency plans. 1040ez online filing These plans are approved by state agencies and can be approved individual site plans or county plans. 1040ez online filing   A list of NRCS conservation programs is available at www. 1040ez online filing nrcs. 1040ez online filing usda. 1040ez online filing gov/programs. 1040ez online filing Individual site plans can be obtained from NRCS offices and the comparable state agencies. 1040ez online filing Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. 1040ez online filing These expenses include, but are not limited to, the following. 1040ez online filing The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. 1040ez online filing The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. 1040ez online filing The eradication of brush. 1040ez online filing The planting of windbreaks. 1040ez online filing You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. 1040ez online filing These expenses are added to the basis of the land. 1040ez online filing If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. 1040ez online filing See chapter 3 for information about payments eligible for the cost-sharing exclusion. 1040ez online filing New farm or farmland. 1040ez online filing   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. 1040ez online filing You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. 1040ez online filing The new farming activity does not have to be the same as the old farming activity. 1040ez online filing For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. 1040ez online filing Land not used for farming. 1040ez online filing   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. 1040ez online filing For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. 1040ez online filing You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. 1040ez online filing Depreciable conservation assets. 1040ez online filing   You generally cannot deduct your expenses for depreciable conservation assets. 1040ez online filing However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. 1040ez online filing See Assessment for Depreciable Property , later. 1040ez online filing   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. 1040ez online filing These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. 1040ez online filing You recover your capital investment through annual allowances for depreciation. 1040ez online filing   You can deduct soil and water conservation expenses for nondepreciable earthen items. 1040ez online filing Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. 1040ez online filing Water well. 1040ez online filing   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. 1040ez online filing It is a capital expense. 1040ez online filing You recover your cost through depreciation. 1040ez online filing You also must capitalize your cost for drilling a test hole. 1040ez online filing If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. 1040ez online filing You can recover the total cost through depreciation deductions. 1040ez online filing   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. 1040ez online filing Abandonment means that all economic benefits from the well are terminated. 1040ez online filing For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. 1040ez online filing Endangered species recovery expenses. 1040ez online filing   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. 1040ez online filing Otherwise, these are capital expenses that must be added to the basis of the land. 1040ez online filing   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. 1040ez online filing See Internal Revenue Code section 175 for more information. 1040ez online filing Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. 1040ez online filing You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. 1040ez online filing Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. 1040ez online filing This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. 1040ez online filing The depreciable property must be used in the district's soil and water conservation activities. 1040ez online filing However, the following limits apply to these assessments. 1040ez online filing The total assessment limit. 1040ez online filing The yearly assessment limit. 1040ez online filing After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. 1040ez online filing The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez online filing See Table 5-1 for a brief summary of these limits. 1040ez online filing Table 5-1. 1040ez online filing Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. 1040ez online filing Your deductible share of the cost to the district for the property. 1040ez online filing Your gross income from farming. 1040ez online filing No one taxpayer can deduct more than 10% of the total assessment. 1040ez online filing Any amount over 10% is a capital expense and is added to the basis of your land. 1040ez online filing If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 1040ez online filing If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. 1040ez online filing You can deduct the remainder in equal amounts over the next 9 tax years. 1040ez online filing Limit for all conservation expenses, including assessments for depreciable property. 1040ez online filing Amounts greater than 25% can be carried to the following year and added to that year's expenses. 1040ez online filing The total is then subject to the 25% of gross income from farming limit in that year. 1040ez online filing To ensure your deduction is within the deduction limits, keep records to show the following. 1040ez online filing The total assessment against all members of the district for the depreciable property. 1040ez online filing Your deductible share of the cost to the district for the depreciable property. 1040ez online filing Your gross income from farming. 1040ez online filing Total assessment limit. 1040ez online filing   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. 1040ez online filing This applies whether you pay the assessment in one payment or in installments. 1040ez online filing If your assessment is more than 10% of the total amount assessed, both the following rules apply. 1040ez online filing The amount over 10% is a capital expense and is added to the basis of your land. 1040ez online filing If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 1040ez online filing Yearly assessment limit. 1040ez online filing   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. 1040ez online filing If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. 1040ez online filing If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. 1040ez online filing You can deduct the remainder in equal amounts over the next 9 tax years. 1040ez online filing Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez online filing Example 1. 1040ez online filing This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. 1040ez online filing Of the assessment, $1,500 is for digging drainage ditches. 1040ez online filing You can deduct this part as a soil or conservation expense as if you had paid it directly. 1040ez online filing The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. 1040ez online filing The total amount assessed by the district against all its members for the depreciable equipment is $7,000. 1040ez online filing The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. 1040ez online filing The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. 1040ez online filing To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. 1040ez online filing Add $500 to the result for a total of $570. 1040ez online filing Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). 1040ez online filing You can deduct the balance at the rate of $70 a year over the next 9 years. 1040ez online filing You add $70 to the $1,500 portion of the assessment for drainage ditches. 1040ez online filing You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez online filing Example 2. 1040ez online filing Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. 1040ez online filing The total amount assessed by the district against all its members for depreciable equipment is $5,500. 1040ez online filing The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. 1040ez online filing The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). 1040ez online filing Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. 1040ez online filing You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. 1040ez online filing Sale or other disposal of land during 9-year period. 1040ez online filing   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. 1040ez online filing Death of farmer during 9-year period. 1040ez online filing   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. 1040ez online filing 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. 1040ez online filing Gross income from farming. 1040ez online filing   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. 1040ez online filing Gains from sales of draft, breeding, or dairy livestock are included. 1040ez online filing Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. 1040ez online filing Carryover of deduction. 1040ez online filing   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. 1040ez online filing However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. 1040ez online filing Example. 1040ez online filing In 2012, you have gross income of $32,000 from two farms. 1040ez online filing During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. 1040ez online filing However, your deduction is limited to 25% of $32,000, or $8,000. 1040ez online filing The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. 1040ez online filing The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. 1040ez online filing Any expenses over the limit in that year are carried to 2014 and later years. 1040ez online filing Net operating loss. 1040ez online filing   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. 1040ez online filing If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. 1040ez online filing When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. 1040ez online filing If you do not choose to deduct the expenses, you must capitalize them. 1040ez online filing Change of method. 1040ez online filing   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. 1040ez online filing To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. 1040ez online filing You or your authorized representative must sign the request. 1040ez online filing   The request must include the following information. 1040ez online filing Your name and address. 1040ez online filing The first tax year the method or change of method is to apply. 1040ez online filing Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. 1040ez online filing If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. 1040ez online filing The total expenses you paid or incurred in the first tax year the method or change of method is to apply. 1040ez online filing A statement that you will account separately in your books for the expenses to which this method or change of method relates. 1040ez online filing Send your request to the following  address. 1040ez online filing  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. 1040ez online filing Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). 1040ez online filing However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. 1040ez online filing Gain on sale of farmland. 1040ez online filing   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. 1040ez online filing If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. 1040ez online filing See Section 1252 property under Other Gains in chapter 9. 1040ez online filing Prev  Up  Next   Home   More Online 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