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1040nr Online Filing Free

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1040nr Online Filing Free

1040nr online filing free 1. 1040nr online filing free   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. 1040nr online filing free Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. 1040nr online filing free Reseller statement. 1040nr online filing free Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. 1040nr online filing free Deep-draft ocean-going vessels. 1040nr online filing free Passenger vessels. 1040nr online filing free Ocean-going barges. 1040nr online filing free State or local governments. 1040nr online filing free Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. 1040nr online filing free Gasoline, including aviation gasoline and gasoline blendstocks. 1040nr online filing free Diesel fuel, including dyed diesel fuel. 1040nr online filing free Diesel-water fuel emulsion. 1040nr online filing free Kerosene, including dyed kerosene and kerosene used in aviation. 1040nr online filing free Other Fuels (including alternative fuels). 1040nr online filing free Compressed natural gas (CNG). 1040nr online filing free Fuels used in commercial transportation on inland waterways. 1040nr online filing free Any liquid used in a fractional ownership program aircraft as fuel. 1040nr online filing free The following terms are used throughout the discussion of fuel taxes. 1040nr online filing free Other terms are defined in the discussion of the specific fuels to which they pertain. 1040nr online filing free Agri-biodiesel. 1040nr online filing free   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. 1040nr online filing free Approved terminal or refinery. 1040nr online filing free   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. 1040nr online filing free Biodiesel. 1040nr online filing free   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. 1040nr online filing free Blended taxable fuel. 1040nr online filing free   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. 1040nr online filing free This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. 1040nr online filing free Blender. 1040nr online filing free   This is the person that produces blended taxable fuel. 1040nr online filing free Bulk transfer. 1040nr online filing free   This is the transfer of taxable fuel by pipeline or vessel. 1040nr online filing free Bulk transfer/terminal system. 1040nr online filing free   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. 1040nr online filing free Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. 1040nr online filing free Cellulosic biofuel. 1040nr online filing free   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. 1040nr online filing free Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). 1040nr online filing free For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. 1040nr online filing free Also see Second generation biofuel below. 1040nr online filing free Diesel-water fuel emulsion. 1040nr online filing free   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. 1040nr online filing free The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 1040nr online filing free Dry lease aircraft exchange. 1040nr online filing free   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 1040nr online filing free Enterer. 1040nr online filing free   This is the importer of record (under customs law) for the taxable fuel. 1040nr online filing free However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. 1040nr online filing free If there is no importer of record, the owner at the time of entry into the United States is the enterer. 1040nr online filing free Entry. 1040nr online filing free   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. 1040nr online filing free This does not apply to fuel brought into Puerto Rico (which is part of the U. 1040nr online filing free S. 1040nr online filing free customs territory), but does apply to fuel brought into the United States from Puerto Rico. 1040nr online filing free Fractional ownership aircraft program and fractional program aircraft. 1040nr online filing free   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 1040nr online filing free Measurement of taxable fuel. 1040nr online filing free   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. 1040nr online filing free Other fuels. 1040nr online filing free   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. 1040nr online filing free Pipeline operator. 1040nr online filing free   This is the person that operates a pipeline within the bulk transfer/terminal system. 1040nr online filing free Position holder. 1040nr online filing free   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. 1040nr online filing free You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. 1040nr online filing free A terminal operator that owns taxable fuel in its terminal is a position holder. 1040nr online filing free Rack. 1040nr online filing free   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. 1040nr online filing free Refiner. 1040nr online filing free   This is any person that owns, operates, or otherwise controls a refinery. 1040nr online filing free Refinery. 1040nr online filing free   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. 1040nr online filing free However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. 1040nr online filing free For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. 1040nr online filing free Registrant. 1040nr online filing free   This is a taxable fuel registrant (see Registration Requirements, later). 1040nr online filing free Removal. 1040nr online filing free   This is any physical transfer of taxable fuel. 1040nr online filing free It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. 1040nr online filing free However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. 1040nr online filing free Renewable diesel. 1040nr online filing free   See Renewable Diesel Credits in chapter 2. 1040nr online filing free Sale. 1040nr online filing free   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. 1040nr online filing free For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. 1040nr online filing free Second generation biofuel. 1040nr online filing free   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. 1040nr online filing free S. 1040nr online filing free C. 1040nr online filing free 7545). 1040nr online filing free It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. 1040nr online filing free It is not alcohol of less than 150 proof (disregard any added denaturants). 1040nr online filing free See Form 6478 for more information. 1040nr online filing free State. 1040nr online filing free   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. 1040nr online filing free An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. 1040nr online filing free Taxable fuel. 1040nr online filing free   This means gasoline, diesel fuel, and kerosene. 1040nr online filing free Terminal. 1040nr online filing free   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. 1040nr online filing free It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. 1040nr online filing free A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. 1040nr online filing free Terminal operator. 1040nr online filing free   This is any person that owns, operates, or otherwise controls a terminal. 1040nr online filing free Throughputter. 1040nr online filing free   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). 1040nr online filing free Vessel operator. 1040nr online filing free   This is the person that operates a vessel within the bulk transfer/terminal system. 1040nr online filing free However, vessel does not include a deep draft ocean-going vessel. 1040nr online filing free Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. 1040nr online filing free A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. 1040nr online filing free For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. 1040nr online filing free The returns are due the last day of the month following the month in which the transaction occurs. 1040nr online filing free Generally, these returns can be filed on paper or electronically. 1040nr online filing free For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. 1040nr online filing free Publication 3536 is only available on the IRS website. 1040nr online filing free Form 720-TO. 1040nr online filing free   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. 1040nr online filing free Each terminal operator must file a separate form for each approved terminal. 1040nr online filing free Form 720-CS. 1040nr online filing free   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. 1040nr online filing free Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. 1040nr online filing free See Form 637 for other persons who must register and for more information about registration. 1040nr online filing free Persons that are required to be registered. 1040nr online filing free   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. 1040nr online filing free Persons that may register. 1040nr online filing free   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. 1040nr online filing free Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. 1040nr online filing free However, they must be registered to file claims for certain sales and uses of fuel. 1040nr online filing free See Form 637 for more information. 1040nr online filing free Taxable fuel registrant. 1040nr online filing free   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. 1040nr online filing free The term registrant as used in the discussions of these fuels means a taxable fuel registrant. 1040nr online filing free Additional information. 1040nr online filing free   See the Form 637 instructions for the information you must submit when you apply for registration. 1040nr online filing free Failure to register. 1040nr online filing free   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. 1040nr online filing free Gasoline and Aviation Gasoline Gasoline. 1040nr online filing free   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. 1040nr online filing free Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. 1040nr online filing free Gasoline also includes gasoline blendstocks, discussed later. 1040nr online filing free Aviation gasoline. 1040nr online filing free   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. 1040nr online filing free Taxable Events The tax on gasoline is $. 1040nr online filing free 184 per gallon. 1040nr online filing free The tax on aviation gasoline is $. 1040nr online filing free 194 per gallon. 1040nr online filing free When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. 1040nr online filing free 141 per gallon. 1040nr online filing free See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. 1040nr online filing free Tax is imposed on the removal, entry, or sale of gasoline. 1040nr online filing free Each of these events is discussed later. 1040nr online filing free Also, see the special rules that apply to gasoline blendstocks, later. 1040nr online filing free If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. 1040nr online filing free See Refunds of Second Tax in chapter 2. 1040nr online filing free Removal from terminal. 1040nr online filing free   All removals of gasoline at a terminal rack are taxable. 1040nr online filing free The position holder for that gasoline is liable for the tax. 1040nr online filing free Two-party exchanges. 1040nr online filing free   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 1040nr online filing free A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 1040nr online filing free The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 1040nr online filing free The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. 1040nr online filing free The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 1040nr online filing free The transaction is subject to a written contract. 1040nr online filing free Terminal operator's liability. 1040nr online filing free   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. 1040nr online filing free   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. 1040nr online filing free The terminal operator is a registrant. 1040nr online filing free The terminal operator has an unexpired notification certificate (discussed later) from the position holder. 1040nr online filing free The terminal operator has no reason to believe any information on the certificate is false. 1040nr online filing free Removal from refinery. 1040nr online filing free   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. 1040nr online filing free It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free It is made at the refinery rack. 1040nr online filing free The refiner is liable for the tax. 1040nr online filing free Exception. 1040nr online filing free   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. 1040nr online filing free The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 1040nr online filing free The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 1040nr online filing free The removal from the refinery is by railcar. 1040nr online filing free The same person operates the refinery and the facility at which the gasoline is received. 1040nr online filing free Entry into the United States. 1040nr online filing free   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. 1040nr online filing free It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free It is not made by bulk transfer. 1040nr online filing free The enterer is liable for the tax. 1040nr online filing free Importer of record's liability. 1040nr online filing free   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 1040nr online filing free   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 1040nr online filing free The importer of record has an unexpired notification certificate (discussed later) from the enterer. 1040nr online filing free The importer of record has no reason to believe any information in the certificate is false. 1040nr online filing free Customs bond. 1040nr online filing free   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 1040nr online filing free Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 1040nr online filing free   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free The position holder is liable for the tax. 1040nr online filing free The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 1040nr online filing free However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 1040nr online filing free Bulk transfers not received at approved terminal or refinery. 1040nr online filing free   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. 1040nr online filing free No tax was previously imposed (as discussed earlier) on any of the following events. 1040nr online filing free The removal from the refinery. 1040nr online filing free The entry into the United States. 1040nr online filing free The removal from a terminal by an unregistered position holder. 1040nr online filing free Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). 1040nr online filing free   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. 1040nr online filing free However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 1040nr online filing free The owner is a registrant. 1040nr online filing free The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. 1040nr online filing free The owner has no reason to believe any information on the certificate is false. 1040nr online filing free The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. 1040nr online filing free The operator is jointly and severally liable if the owner does not meet these conditions. 1040nr online filing free Sales to unregistered person. 1040nr online filing free   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. 1040nr online filing free   The seller is liable for the tax. 1040nr online filing free However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 1040nr online filing free   The seller is a registrant. 1040nr online filing free The seller has an unexpired notification certificate (discussed later) from the buyer. 1040nr online filing free The seller has no reason to believe any information on the certificate is false. 1040nr online filing free The buyer of the gasoline is liable for the tax if the seller meets these conditions. 1040nr online filing free The buyer is jointly and severally liable if the seller does not meet these conditions. 1040nr online filing free Exception. 1040nr online filing free   The tax does not apply to a sale if all of the following apply. 1040nr online filing free The buyer's principal place of business is not in the United States. 1040nr online filing free The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 1040nr online filing free The seller is a registrant and the exporter of record. 1040nr online filing free The fuel was exported. 1040nr online filing free Removal or sale of blended gasoline. 1040nr online filing free   The removal or sale of blended gasoline by the blender is taxable. 1040nr online filing free See Blended taxable fuel under Definitions, earlier. 1040nr online filing free   The blender is liable for the tax. 1040nr online filing free The tax is figured on the number of gallons not previously subject to the tax on gasoline. 1040nr online filing free   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. 1040nr online filing free See Form 720 to report this tax. 1040nr online filing free You also must be registered with the IRS as a blender. 1040nr online filing free See Form 637. 1040nr online filing free   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 1040nr online filing free Notification certificate. 1040nr online filing free   The notification certificate is used to notify a person of the registration status of the registrant. 1040nr online filing free A copy of the registrant's letter of registration cannot be used as a notification certificate. 1040nr online filing free A model notification certificate is shown in the Appendix as Model Certificate C. 1040nr online filing free A notification certificate must contain all information necessary to complete the model. 1040nr online filing free   The certificate may be included as part of any business records normally used for a sale. 1040nr online filing free A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. 1040nr online filing free The registrant must provide a new certificate if any information on a certificate has changed. 1040nr online filing free Additional persons liable. 1040nr online filing free   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. 1040nr online filing free Gasoline Blendstocks Gasoline blendstocks may be subject to $. 1040nr online filing free 001 per gallon LUST tax as discussed below. 1040nr online filing free Gasoline includes gasoline blendstocks. 1040nr online filing free The previous discussions apply to these blendstocks. 1040nr online filing free However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. 1040nr online filing free 001 per gallon or are not subject to the excise tax. 1040nr online filing free Blendstocks. 1040nr online filing free   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. 1040nr online filing free   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. 1040nr online filing free Not used to produce finished gasoline. 1040nr online filing free   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. 1040nr online filing free Removals and entries not connected to sale. 1040nr online filing free   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. 1040nr online filing free Removals and entries connected to sale. 1040nr online filing free   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. 1040nr online filing free The person has an unexpired certificate (discussed later) from the buyer. 1040nr online filing free The person has no reason to believe any information in the certificate is false. 1040nr online filing free Sales after removal or entry. 1040nr online filing free   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. 1040nr online filing free The seller is liable for the tax. 1040nr online filing free However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. 1040nr online filing free The seller has an unexpired certificate (discussed next) from the buyer. 1040nr online filing free The seller has no reason to believe any information in the certificate is false. 1040nr online filing free Certificate of buyer. 1040nr online filing free   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. 1040nr online filing free The certificate may be included as part of any business records normally used for a sale. 1040nr online filing free A model certificate is shown in the Appendix as Model Certificate D. 1040nr online filing free The certificate must contain all information necessary to complete the model. 1040nr online filing free   A certificate expires on the earliest of the following dates. 1040nr online filing free The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040nr online filing free The date a new certificate is provided to the seller. 1040nr online filing free The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. 1040nr online filing free The buyer must provide a new certificate if any information on a certificate has changed. 1040nr online filing free   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. 1040nr online filing free Received at approved terminal or refinery. 1040nr online filing free   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. 1040nr online filing free The person is a registrant. 1040nr online filing free The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. 1040nr online filing free The person has no reason to believe any information on the certificate is false. 1040nr online filing free Bulk transfers to registered industrial user. 1040nr online filing free   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. 1040nr online filing free An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. 1040nr online filing free Credits or Refunds. 1040nr online filing free   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. 1040nr online filing free For more information, see chapter 2. 1040nr online filing free Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). 1040nr online filing free However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. 1040nr online filing free Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. 1040nr online filing free A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. 1040nr online filing free A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. 1040nr online filing free However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. 1040nr online filing free Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 1040nr online filing free 5 and No. 1040nr online filing free 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. 1040nr online filing free An excluded liquid is either of the following. 1040nr online filing free A liquid that contains less than 4% normal paraffins. 1040nr online filing free A liquid with all the following properties. 1040nr online filing free Distillation range of 125 degrees Fahrenheit or less. 1040nr online filing free Sulfur content of 10 ppm or less. 1040nr online filing free Minimum color of +27 Saybolt. 1040nr online filing free Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. 1040nr online filing free Kerosene. 1040nr online filing free   This means any of the following liquids. 1040nr online filing free One of the two grades of kerosene (No. 1040nr online filing free 1-K and No. 1040nr online filing free 2-K) covered by ASTM specification D3699. 1040nr online filing free Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). 1040nr online filing free See Kerosene for Use in Aviation, later. 1040nr online filing free   However, kerosene does not include excluded liquid, discussed earlier. 1040nr online filing free   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. 1040nr online filing free Diesel-powered highway vehicle. 1040nr online filing free   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. 1040nr online filing free Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. 1040nr online filing free For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. 1040nr online filing free 2) in chapter 2. 1040nr online filing free Diesel-powered train. 1040nr online filing free   This is any diesel-powered equipment or machinery that rides on rails. 1040nr online filing free The term includes a locomotive, work train, switching engine, and track maintenance machine. 1040nr online filing free Taxable Events The tax on diesel fuel and kerosene is $. 1040nr online filing free 244 per gallon. 1040nr online filing free It is imposed on the removal, entry, or sale of diesel fuel and kerosene. 1040nr online filing free Each of these events is discussed later. 1040nr online filing free Only the $. 1040nr online filing free 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. 1040nr online filing free If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. 1040nr online filing free See Refunds of Second Tax in chapter 2. 1040nr online filing free Use in certain intercity and local buses. 1040nr online filing free   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. 1040nr online filing free A claim for $. 1040nr online filing free 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. 1040nr online filing free An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. 1040nr online filing free The bus must be engaged in one of the following activities. 1040nr online filing free Scheduled transportation along regular routes regardless of the size of the bus. 1040nr online filing free Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). 1040nr online filing free A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. 1040nr online filing free Removal from terminal. 1040nr online filing free   All removals of diesel fuel and kerosene at a terminal rack are taxable. 1040nr online filing free The position holder for that fuel is liable for the tax. 1040nr online filing free Two-party exchanges. 1040nr online filing free   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 1040nr online filing free A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 1040nr online filing free The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 1040nr online filing free The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. 1040nr online filing free The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 1040nr online filing free The transaction is subject to a written contract. 1040nr online filing free Terminal operator's liability. 1040nr online filing free   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). 1040nr online filing free   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. 1040nr online filing free However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. 1040nr online filing free The terminal operator is a registrant. 1040nr online filing free The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. 1040nr online filing free The terminal operator has no reason to believe any information on the certificate is false. 1040nr online filing free Removal from refinery. 1040nr online filing free   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. 1040nr online filing free It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free It is made at the refinery rack. 1040nr online filing free The refiner is liable for the tax. 1040nr online filing free Exception. 1040nr online filing free   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. 1040nr online filing free The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 1040nr online filing free The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 1040nr online filing free The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. 1040nr online filing free Entry into the United States. 1040nr online filing free   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. 1040nr online filing free It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free It is not made by bulk transfer. 1040nr online filing free The enterer is liable for the tax. 1040nr online filing free Importer of record's liability. 1040nr online filing free   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 1040nr online filing free   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 1040nr online filing free The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. 1040nr online filing free The importer of record has no reason to believe any information in the certificate is false. 1040nr online filing free Customs bond. 1040nr online filing free   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 1040nr online filing free Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 1040nr online filing free   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. 1040nr online filing free The position holder is liable for the tax. 1040nr online filing free The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 1040nr online filing free However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 1040nr online filing free Bulk transfers not received at approved terminal or refinery. 1040nr online filing free   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. 1040nr online filing free No tax was previously imposed (as discussed earlier) on any of the following events. 1040nr online filing free The removal from the refinery. 1040nr online filing free The entry into the United States. 1040nr online filing free The removal from a terminal by an unregistered position holder. 1040nr online filing free Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). 1040nr online filing free   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. 1040nr online filing free However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 1040nr online filing free The owner is a registrant. 1040nr online filing free The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. 1040nr online filing free The owner has no reason to believe any information on the certificate is false. 1040nr online filing free The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. 1040nr online filing free The operator is jointly and severally liable if the owner does not meet these conditions. 1040nr online filing free Sales to unregistered person. 1040nr online filing free   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. 1040nr online filing free   The seller is liable for the tax. 1040nr online filing free However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 1040nr online filing free The seller is a registrant. 1040nr online filing free The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. 1040nr online filing free The seller has no reason to believe any information on the certificate is false. 1040nr online filing free The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. 1040nr online filing free The buyer is jointly and severally liable if the seller does not meet these conditions. 1040nr online filing free Exception. 1040nr online filing free   The tax does not apply to a sale if all of the following apply. 1040nr online filing free The buyer's principal place of business is not in the United States. 1040nr online filing free The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 1040nr online filing free The seller is a registrant and the exporter of record. 1040nr online filing free The fuel was exported. 1040nr online filing free Removal or sale of blended diesel fuel or kerosene. 1040nr online filing free   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. 1040nr online filing free Blended taxable fuel produced using biodiesel is subject to the tax. 1040nr online filing free See Blended taxable fuel under Definitions, earlier. 1040nr online filing free   The blender is liable for the tax. 1040nr online filing free The tax is figured on the number of gallons not previously subject to the tax. 1040nr online filing free   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. 1040nr online filing free Generally, the biodiesel mixture must be diesel fuel (defined earlier). 1040nr online filing free See Form 720 to report this tax. 1040nr online filing free You also must be registered by the IRS as a blender. 1040nr online filing free See Form 637 for more information. 1040nr online filing free   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 1040nr online filing free Additional persons liable. 1040nr online filing free   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. 1040nr online filing free Credits or Refunds. 1040nr online filing free   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. 1040nr online filing free For more information, see chapter 2. 1040nr online filing free Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. 1040nr online filing free 001 per gallon LUST tax as discussed below, unless the fuel is for export. 1040nr online filing free The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. 1040nr online filing free The person otherwise liable for tax (for example, the position holder) is a registrant. 1040nr online filing free In the case of a removal from a terminal, the terminal is an approved terminal. 1040nr online filing free The diesel fuel or kerosene satisfies the dyeing requirements (described next). 1040nr online filing free Dyeing requirements. 1040nr online filing free   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. 1040nr online filing free It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. 1040nr online filing free 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. 1040nr online filing free Is indelibly dyed by mechanical injection. 1040nr online filing free See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. 1040nr online filing free Notice required. 1040nr online filing free   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. 1040nr online filing free   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. 1040nr online filing free   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). 1040nr online filing free That seller is subject to the penalty described next. 1040nr online filing free Penalty. 1040nr online filing free   A penalty is imposed on a person if any of the following situations apply. 1040nr online filing free Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. 1040nr online filing free Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. 1040nr online filing free The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. 1040nr online filing free The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. 1040nr online filing free   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. 1040nr online filing free After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. 1040nr online filing free   This penalty is in addition to any tax imposed on the fuel. 1040nr online filing free   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. 1040nr online filing free   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. 1040nr online filing free   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. 1040nr online filing free However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. 1040nr online filing free The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. 1040nr online filing free Exception to penalty. 1040nr online filing free   The penalty under item (3) will not apply in any of the following situations. 1040nr online filing free Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. 1040nr online filing free Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. 1040nr online filing free The alteration or attempted alteration occurs in an exempt area of Alaska. 1040nr online filing free See Removal for sale or use in Alaska, later. 1040nr online filing free Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. 1040nr online filing free Alaska and Feedstocks Tax of $. 1040nr online filing free 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). 1040nr online filing free Undyed kerosene used for feedstock purposes. 1040nr online filing free Removal for sale or use in Alaska. 1040nr online filing free   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. 1040nr online filing free The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. 1040nr online filing free The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. 1040nr online filing free In the case of a removal from a terminal, the terminal is an approved terminal. 1040nr online filing free The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. 1040nr online filing free   If all three of the requirements above are not met, then tax is imposed at $. 1040nr online filing free 244 per gallon. 1040nr online filing free   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. 1040nr online filing free Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. 1040nr online filing free Later sales. 1040nr online filing free   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. 1040nr online filing free The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. 1040nr online filing free However, the sale is not taxable (other than the LUST tax at $. 1040nr online filing free 001 per gallon) if all the following requirements are met. 1040nr online filing free The fuel is sold in Alaska for certain nontaxable uses. 1040nr online filing free The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. 1040nr online filing free The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. 1040nr online filing free Feedstock purposes. 1040nr online filing free   The $. 1040nr online filing free 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. 1040nr online filing free The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. 1040nr online filing free In the case of a removal from a terminal, the terminal is an approved terminal. 1040nr online filing free Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. 1040nr online filing free   If all of the requirements above are not met, then tax is imposed at $. 1040nr online filing free 244 per gallon. 1040nr online filing free   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. 1040nr online filing free For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. 1040nr online filing free A feedstock user is a person that uses kerosene for a feedstock purpose. 1040nr online filing free A registered feedstock user is a person that has been registered by the IRS as a feedstock user. 1040nr online filing free See Registration Requirements, earlier. 1040nr online filing free Later sales. 1040nr online filing free   The excise tax ($. 1040nr online filing free 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. 1040nr online filing free The tax is imposed at the time of the later sale and that seller is liable for the tax. 1040nr online filing free Certificate. 1040nr online filing free   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. 1040nr online filing free The certificate may be included as part of any business records normally used for a sale. 1040nr online filing free A model certificate is shown in the Appendix as Model Certificate G. 1040nr online filing free Your certificate must contain all information necessary to complete the model. 1040nr online filing free   A certificate expires on the earliest of the following dates. 1040nr online filing free The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040nr online filing free The date the seller is provided a new certificate or notice that the current certificate is invalid. 1040nr online filing free The date the seller is notified the buyer's registration has been revoked or suspended. 1040nr online filing free   The buyer must provide a new certificate if any information on a certificate has changed. 1040nr online filing free Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. 1040nr online filing free Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. 1040nr online filing free Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. 1040nr online filing free Any liquid other than gasoline, diesel fuel, or kerosene. 1040nr online filing free Generally, this back-up tax is imposed at a rate of $. 1040nr online filing free 244 per gallon. 1040nr online filing free Liability for tax. 1040nr online filing free   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. 1040nr online filing free In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. 1040nr online filing free Exemptions from the back-up tax. 1040nr online filing free   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. 1040nr online filing free   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. 1040nr online filing free Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 1040nr online filing free A reduced tax rate of $. 1040nr online filing free 198 per gallon is imposed on a diesel-water fuel emulsion. 1040nr online filing free To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. 1040nr online filing free If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. 1040nr online filing free 244 per gallon. 1040nr online filing free Credits or refunds. 1040nr online filing free   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. 1040nr online filing free Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. 1040nr online filing free 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). 1040nr online filing free For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. 1040nr online filing free 219. 1040nr online filing free The rate of $. 1040nr online filing free 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. 1040nr online filing free The airport terminal does not need to be a secured airport terminal for this rate to apply. 1040nr online filing free However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. 1040nr online filing free For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. 1040nr online filing free 044 per gallon. 1040nr online filing free For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. 1040nr online filing free 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. 1040nr online filing free See Terminal located within a secured area of an airport, later. 1040nr online filing free In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 1040nr online filing free For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. 1040nr online filing free 001. 1040nr online filing free There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 1040nr online filing free The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. 1040nr online filing free See Terminal located within a secured area of an airport, later. 1040nr online filing free In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 1040nr online filing free The position holder is liable for the $. 1040nr online filing free 001 per gallon tax. 1040nr online filing free For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. 1040nr online filing free 141 per gallon applies. 1040nr online filing free Certain refueler trucks, tankers, and tank wagons treated as terminals. 1040nr online filing free   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. 1040nr online filing free Such terminal is located within an area of an airport. 1040nr online filing free Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. 1040nr online filing free Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. 1040nr online filing free The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. 1040nr online filing free Information reporting will be required by terminal operators regarding this provision. 1040nr online filing free Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. 1040nr online filing free Terminal located within a secured area of an airport. 1040nr online filing free   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. 1040nr online filing free This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. 1040nr online filing free Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. 1040nr online filing free 044 per gallon. 1040nr online filing free However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). 1040nr online filing free For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. 1040nr online filing free For the aircraft operator to be liable for the tax $. 1040nr online filing free 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. 1040nr online filing free Commercial aviation. 1040nr online filing free   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. 1040nr online filing free However, commercial aviation does not include any of the following uses. 1040nr online filing free Any use exclusively for the purpose of skydiving. 1040nr online filing free Certain air transportation by seaplane. 1040nr online filing free See Seaplanes under Transportation of Persons by Air in chapter 4. 1040nr online filing free Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. 1040nr online filing free For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. 1040nr online filing free Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. 1040nr online filing free For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. 1040nr online filing free Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. 1040nr online filing free See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. 1040nr online filing free Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. 1040nr online filing free 141 per gallon. 1040nr online filing free The fractional ownership program manager is liable for the tax. 1040nr online filing free The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. 1040nr online filing free If the surtax is imposed, the following air transportation taxes do not apply. 1040nr online filing free Transportation of persons by air. 1040nr online filing free Transportation of property by air. 1040nr online filing free Use of international air travel facilities. 1040nr online filing free These taxes are described under Air Transportation Taxes, later. 1040nr online filing free A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. 1040nr online filing free Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. 1040nr online filing free Fractional program aircraft. 1040nr online filing free   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. 1040nr online filing free S. 1040nr online filing free   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. 1040nr online filing free In such situations, the flight is not commercial aviation. 1040nr online filing free Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. 1040nr online filing free Fractional owner. 1040nr online filing free   Any person owning any interest (including the entire interest) in a fractional program aircraft. 1040nr online filing free Dry lease aircraft exchange. 1040nr online filing free   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. 1040nr online filing free Special rule relating to deadhead service. 1040nr online filing free   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. 1040nr online filing free More information. 1040nr online filing free   See section 4043 for more information on the surtax. 1040nr online filing free Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. 1040nr online filing free Certificate. 1040nr online filing free   The certificate may be included as part of any business records normally used for a sale. 1040nr online filing free See Model Certificate K in the Appendix. 1040nr online filing free   A certificate expires on the earliest of the following dates. 1040nr online filing free The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040nr online filing free The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. 1040nr online filing free The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. 1040nr online filing free   The buyer must provide a new certificate if any information on a certificate has changed. 1040nr online filing free   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. 1040nr online filing free Exempt use. 1040nr online filing free   The rate on kerosene for use in aviation is $. 1040nr online filing free 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. 1040nr online filing free An exempt use includes kerosene for the exclusive use of a state or local government. 1040nr online filing free There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 1040nr online filing free Flash title transaction. 1040nr online filing free   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. 1040nr online filing free In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. 1040nr online filing free In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. 1040nr online filing free Reseller statement. 1040nr online filing free   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. 1040nr online filing free Credits or Refunds. 1040nr online filing free   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). 1040nr online filing free A claim may be made by a registered ultimate vendor for certain sales. 1040nr online filing free For more information, see chapter 2. 1040nr online filing free Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. 1040nr online filing free Other Fuels include alternative fuels. 1040nr online filing free Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. 1040nr online filing free Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. 1040nr online filing free Qualified methanol and ethanol fuels. 1040nr online filing free   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. 1040nr online filing free The tax rates are listed in the Instructions for Form 720. 1040nr online filing free Partially exempt methanol and ethanol fuels. 1040nr online filing free   A reduced tax rate applies to these fuels. 1040nr online filing free Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. 1040nr online filing free The tax rates are listed in the Instructions for Form 720. 1040nr online filing free Motor vehicles. 1040nr online filing free   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. 1040nr online filing free They are propelled by a motor. 1040nr online filing free They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t
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The 1040nr Online Filing Free

1040nr online filing free 1. 1040nr online filing free   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. 1040nr online filing free Amount realized on a recourse debt. 1040nr online filing free Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. 1040nr online filing free S. 1040nr online filing free Individual Income Tax Return 1040X Amended U. 1040nr online filing free S. 1040nr online filing free Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. 1040nr online filing free However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. 1040nr online filing free See chapter 5 for information about getting publications and forms. 1040nr online filing free Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. 1040nr online filing free An exchange is a transfer of property for other property or services. 1040nr online filing free The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. 1040nr online filing free Sale or lease. 1040nr online filing free    Some agreements that seem to be leases may really be conditional sales contracts. 1040nr online filing free The intention of the parties to the agreement can help you distinguish between a sale and a lease. 1040nr online filing free   There is no test or group of tests to prove what the parties intended when they made the agreement. 1040nr online filing free You should consider each agreement based on its own facts and circumstances. 1040nr online filing free For more information, see chapter 3 in Publication 535, Business Expenses. 1040nr online filing free Cancellation of a lease. 1040nr online filing free    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. 1040nr online filing free Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. 1040nr online filing free Copyright. 1040nr online filing free    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. 1040nr online filing free It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. 1040nr online filing free Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. 1040nr online filing free   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. 1040nr online filing free For more information, see Section 1231 Gains and Losses in chapter 3. 1040nr online filing free Easement. 1040nr online filing free   The amount received for granting an easement is subtracted from the basis of the property. 1040nr online filing free If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. 1040nr online filing free If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. 1040nr online filing free   Any amount received that is more than the basis to be reduced is a taxable gain. 1040nr online filing free The transaction is reported as a sale of property. 1040nr online filing free   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. 1040nr online filing free However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. 1040nr online filing free   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. 1040nr online filing free Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. 1040nr online filing free See Gain or Loss From Condemnations, later. 1040nr online filing free Property transferred to satisfy debt. 1040nr online filing free   A transfer of property to satisfy a debt is an exchange. 1040nr online filing free Note's maturity date extended. 1040nr online filing free   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. 1040nr online filing free Also, it is not considered a closed and completed transaction that would result in a gain or loss. 1040nr online filing free However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. 1040nr online filing free Each case must be determined by its own facts. 1040nr online filing free For more information, see Regulations section 1. 1040nr online filing free 1001-3. 1040nr online filing free Transfer on death. 1040nr online filing free   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. 1040nr online filing free No taxable gain or deductible loss results from the transfer. 1040nr online filing free Bankruptcy. 1040nr online filing free   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. 1040nr online filing free Consequently, the transfer generally does not result in gain or loss. 1040nr online filing free For more information, see Publication 908, Bankruptcy Tax Guide. 1040nr online filing free Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. 1040nr online filing free A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. 1040nr online filing free A loss is the adjusted basis of the property that is more than the amount you realize. 1040nr online filing free   Table 1-1. 1040nr online filing free How To Figure Whether You Have a Gain or Loss IF your. 1040nr online filing free . 1040nr online filing free . 1040nr online filing free THEN you have a. 1040nr online filing free . 1040nr online filing free . 1040nr online filing free Adjusted basis is more than the amount realized, Loss. 1040nr online filing free Amount realized is more than the adjusted basis, Gain. 1040nr online filing free Basis. 1040nr online filing free   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. 1040nr online filing free The basis of property you buy is usually its cost. 1040nr online filing free However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. 1040nr online filing free See Basis Other Than Cost in Publication 551, Basis of Assets. 1040nr online filing free Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. 1040nr online filing free See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. 1040nr online filing free Adjusted basis. 1040nr online filing free   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. 1040nr online filing free Increases include costs of any improvements having a useful life of more than 1 year. 1040nr online filing free Decreases include depreciation and casualty losses. 1040nr online filing free For more details and additional examples, see Adjusted Basis in Publication 551. 1040nr online filing free Amount realized. 1040nr online filing free   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. 1040nr online filing free The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. 1040nr online filing free Fair market value. 1040nr online filing free   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. 1040nr online filing free If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. 1040nr online filing free If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. 1040nr online filing free Example. 1040nr online filing free You used a building in your business that cost you $70,000. 1040nr online filing free You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. 1040nr online filing free You sold the building for $100,000 plus property having an FMV of $20,000. 1040nr online filing free The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. 1040nr online filing free The selling expenses were $4,000. 1040nr online filing free Your gain on the sale is figured as follows. 1040nr online filing free Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. 1040nr online filing free   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. 1040nr online filing free Recognized gains must be included in gross income. 1040nr online filing free Recognized losses are deductible from gross income. 1040nr online filing free However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. 1040nr online filing free See Nontaxable Exchanges, later. 1040nr online filing free Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. 1040nr online filing free Interest in property. 1040nr online filing free   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. 1040nr online filing free If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. 1040nr online filing free Your basis in the property is disregarded. 1040nr online filing free This rule does not apply if all interests in the property are disposed of at the same time. 1040nr online filing free Example 1. 1040nr online filing free Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. 1040nr online filing free You decide to sell your life interest in the farm. 1040nr online filing free The entire amount you receive is a recognized gain. 1040nr online filing free Your basis in the farm is disregarded. 1040nr online filing free Example 2. 1040nr online filing free The facts are the same as in Example 1, except that your brother joins you in selling the farm. 1040nr online filing free The entire interest in the property is sold, so your basis in the farm is not disregarded. 1040nr online filing free Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. 1040nr online filing free Canceling a sale of real property. 1040nr online filing free   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. 1040nr online filing free If the buyer returns the property in the year of sale, no gain or loss is recognized. 1040nr online filing free This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. 1040nr online filing free If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. 1040nr online filing free When the property is returned in a later year, you acquire a new basis in the property. 1040nr online filing free That basis is equal to the amount you pay to the buyer. 1040nr online filing free Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. 1040nr online filing free You have a gain if the amount realized is more than your adjusted basis in the property. 1040nr online filing free However, you do not have a loss if the amount realized is less than the adjusted basis of the property. 1040nr online filing free Bargain sales to charity. 1040nr online filing free   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. 1040nr online filing free If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. 1040nr online filing free The adjusted basis of the part sold is figured as follows. 1040nr online filing free Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. 1040nr online filing free This allocation rule does not apply if a charitable contribution deduction is not allowable. 1040nr online filing free   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. 1040nr online filing free Example. 1040nr online filing free You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. 1040nr online filing free Your adjusted basis in the property is $4,000. 1040nr online filing free Your gain on the sale is $1,200, figured as follows. 1040nr online filing free Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. 1040nr online filing free You must subtract depreciation you took or could have taken from the basis of the business or rental part. 1040nr online filing free However, see the special rule below for a home used partly for business or rental. 1040nr online filing free You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. 1040nr online filing free Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. 1040nr online filing free Any gain on the personal part of the property is a capital gain. 1040nr online filing free You cannot deduct a loss on the personal part. 1040nr online filing free Home used partly for business or rental. 1040nr online filing free    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. 1040nr online filing free See Property Used Partly for Business or Rental, in Publication 523. 1040nr online filing free Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. 1040nr online filing free You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. 1040nr online filing free However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. 1040nr online filing free Figure the loss you can deduct as follows. 1040nr online filing free Use the lesser of the property's adjusted basis or fair market value at the time of the change. 1040nr online filing free Add to (1) the cost of any improvements and other increases to basis since the change. 1040nr online filing free Subtract from (2) depreciation and any other decreases to basis since the change. 1040nr online filing free Subtract the amount you realized on the sale from the result in (3). 1040nr online filing free If the amount you realized is more than the result in (3), treat this result as zero. 1040nr online filing free The result in (4) is the loss you can deduct. 1040nr online filing free Example. 1040nr online filing free You changed your main home to rental property 5 years ago. 1040nr online filing free At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. 1040nr online filing free This year, you sold the property for $55,000. 1040nr online filing free You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. 1040nr online filing free Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. 1040nr online filing free Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. 1040nr online filing free   If you have a gain on the sale, you generally must recognize the full amount of the gain. 1040nr online filing free You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. 1040nr online filing free   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. 1040nr online filing free However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. 1040nr online filing free   For more information, see Business Use or Rental of Home in Publication 523. 1040nr online filing free In addition, special rules apply if the home sold was acquired in a like-kind exchange. 1040nr online filing free See Special Situations in Publication 523. 1040nr online filing free Also see Like-Kind Exchanges, later. 1040nr online filing free Abandonments The abandonment of property is a disposition of property. 1040nr online filing free You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. 1040nr online filing free Generally, abandonment is not treated as a sale or exchange of the property. 1040nr online filing free If the amount you realize (if any) is more than your adjusted basis, then you have a gain. 1040nr online filing free If your adjusted basis is more than the amount you realize (if any), then you have a loss. 1040nr online filing free Loss from abandonment of business or investment property is deductible as a loss. 1040nr online filing free A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. 1040nr online filing free This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. 1040nr online filing free If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. 1040nr online filing free The abandonment loss is deducted in the tax year in which the loss is sustained. 1040nr online filing free If the abandoned property is secured by debt, special rules apply. 1040nr online filing free The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). 1040nr online filing free For more information, including examples, see chapter 3 of Publication 4681. 1040nr online filing free You cannot deduct any loss from abandonment of your home or other property held for personal use only. 1040nr online filing free Cancellation of debt. 1040nr online filing free   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. 1040nr online filing free This income is separate from any loss realized from abandonment of the property. 1040nr online filing free   You must report this income on your tax return unless one of the following applies. 1040nr online filing free The cancellation is intended as a gift. 1040nr online filing free The debt is qualified farm debt. 1040nr online filing free The debt is qualified real property business debt. 1040nr online filing free You are insolvent or bankrupt. 1040nr online filing free The debt is qualified principal residence indebtedness. 1040nr online filing free File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. 1040nr online filing free For more information, including other exceptions and exclusion, see Publication 4681. 1040nr online filing free Forms 1099-A and 1099-C. 1040nr online filing free   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. 1040nr online filing free However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. 1040nr online filing free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. 1040nr online filing free For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. 1040nr online filing free Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. 1040nr online filing free The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. 1040nr online filing free This is true even if you voluntarily return the property to the lender. 1040nr online filing free You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. 1040nr online filing free Buyer's (borrower's) gain or loss. 1040nr online filing free   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. 1040nr online filing free The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. 1040nr online filing free See Gain or Loss From Sales and Exchanges, earlier. 1040nr online filing free You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. 1040nr online filing free Amount realized on a nonrecourse debt. 1040nr online filing free   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. 1040nr online filing free The full canceled debt is included even if the fair market value of the property is less than the canceled debt. 1040nr online filing free Example 1. 1040nr online filing free Chris bought a new car for $15,000. 1040nr online filing free He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. 1040nr online filing free Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. 1040nr online filing free The credit company repossessed the car because he stopped making loan payments. 1040nr online filing free The balance due after taking into account the payments Chris made was $10,000. 1040nr online filing free The fair market value of the car when repossessed was $9,000. 1040nr online filing free The amount Chris realized on the repossession is $10,000. 1040nr online filing free That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. 1040nr online filing free Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). 1040nr online filing free He has a $5,000 nondeductible loss. 1040nr online filing free Example 2. 1040nr online filing free Abena paid $200,000 for her home. 1040nr online filing free She paid $15,000 down and borrowed the remaining $185,000 from a bank. 1040nr online filing free Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. 1040nr online filing free The bank foreclosed on the loan because Abena stopped making payments. 1040nr online filing free When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. 1040nr online filing free The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. 1040nr online filing free She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). 1040nr online filing free She has a $5,000 realized gain. 1040nr online filing free Amount realized on a recourse debt. 1040nr online filing free   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. 1040nr online filing free You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. 1040nr online filing free The amount realized does not include the canceled debt that is your income from cancellation of debt. 1040nr online filing free See Cancellation of debt, below. 1040nr online filing free Seller's (lender's) gain or loss on repossession. 1040nr online filing free   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. 1040nr online filing free For more information, see Repossession in Publication 537. 1040nr online filing free    Table 1-2. 1040nr online filing free Worksheet for Foreclosures and Repossessions Part 1. 1040nr online filing free Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. 1040nr online filing free Complete this part only  if you were personally liable for the debt. 1040nr online filing free Otherwise,  go to Part 2. 1040nr online filing free   1. 1040nr online filing free Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. 1040nr online filing free Enter the fair market value of the transferred property   3. 1040nr online filing free Ordinary income from cancellation of debt upon foreclosure or    repossession. 1040nr online filing free * Subtract line 2 from line 1. 1040nr online filing free   If less than zero, enter zero   Part 2. 1040nr online filing free Figure your gain or loss from foreclosure or repossession. 1040nr online filing free   4. 1040nr online filing free If you completed Part 1, enter the smaller of line 1 or line 2. 1040nr online filing free   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. 1040nr online filing free Enter any proceeds you received from the foreclosure sale   6. 1040nr online filing free Add lines 4 and 5   7. 1040nr online filing free Enter the adjusted basis of the transferred property   8. 1040nr online filing free Gain or loss from foreclosure or repossession. 1040nr online filing free Subtract line 7  from line 6   * The income may not be taxable. 1040nr online filing free See Cancellation of debt. 1040nr online filing free Cancellation of debt. 1040nr online filing free   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. 1040nr online filing free This income is separate from any gain or loss realized from the foreclosure or repossession. 1040nr online filing free Report the income from cancellation of a debt related to a business or rental activity as business or rental income. 1040nr online filing free    You can use Table 1-2 to figure your income from cancellation of debt. 1040nr online filing free   You must report this income on your tax return unless one of the following applies. 1040nr online filing free The cancellation is intended as a gift. 1040nr online filing free The debt is qualified farm debt. 1040nr online filing free The debt is qualified real property business debt. 1040nr online filing free You are insolvent or bankrupt. 1040nr online filing free The debt is qualified principal residence indebtedness. 1040nr online filing free File Form 982 to report the income exclusion. 1040nr online filing free Example 1. 1040nr online filing free Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). 1040nr online filing free In this case, the amount he realizes is $9,000. 1040nr online filing free This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). 1040nr online filing free Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). 1040nr online filing free He has a $6,000 nondeductible loss. 1040nr online filing free He also is treated as receiving ordinary income from cancellation of debt. 1040nr online filing free That income is $1,000 ($10,000 − $9,000). 1040nr online filing free This is the part of the canceled debt not included in the amount realized. 1040nr online filing free Example 2. 1040nr online filing free Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). 1040nr online filing free In this case, the amount she realizes is $170,000. 1040nr online filing free This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). 1040nr online filing free Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). 1040nr online filing free She has a $5,000 nondeductible loss. 1040nr online filing free She also is treated as receiving ordinary income from cancellation of debt. 1040nr online filing free (The debt is not exempt from tax as discussed under Cancellation of debt, above. 1040nr online filing free ) That income is $10,000 ($180,000 − $170,000). 1040nr online filing free This is the part of the canceled debt not included in the amount realized. 1040nr online filing free Forms 1099-A and 1099-C. 1040nr online filing free   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. 1040nr online filing free However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. 1040nr online filing free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. 1040nr online filing free For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. 1040nr online filing free Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. 1040nr online filing free Involuntary conversions are also called involuntary exchanges. 1040nr online filing free Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. 1040nr online filing free You report the gain or deduct the loss on your tax return for the year you realize it. 1040nr online filing free You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. 1040nr online filing free However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. 1040nr online filing free Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. 1040nr online filing free Your basis for the new property is the same as your basis for the converted property. 1040nr online filing free This means that the gain is deferred until a taxable sale or exchange occurs. 1040nr online filing free If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. 1040nr online filing free This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. 1040nr online filing free If you have a gain or loss from the destruction or theft of property, see Publication 547. 1040nr online filing free Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. 1040nr online filing free The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. 1040nr online filing free The owner receives a condemnation award (money or property) in exchange for the property taken. 1040nr online filing free A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. 1040nr online filing free Example. 1040nr online filing free A local government authorized to acquire land for public parks informed you that it wished to acquire your property. 1040nr online filing free After the local government took action to condemn your property, you went to court to keep it. 1040nr online filing free But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. 1040nr online filing free This is a condemnation of private property for public use. 1040nr online filing free Threat of condemnation. 1040nr online filing free   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. 1040nr online filing free You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. 1040nr online filing free   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. 1040nr online filing free If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. 1040nr online filing free Reports of condemnation. 1040nr online filing free   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. 1040nr online filing free You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. 1040nr online filing free If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. 1040nr online filing free Example. 1040nr online filing free Your property lies along public utility lines. 1040nr online filing free The utility company has the authority to condemn your property. 1040nr online filing free The company informs you that it intends to acquire your property by negotiation or condemnation. 1040nr online filing free A threat of condemnation exists when you receive the notice. 1040nr online filing free Related property voluntarily sold. 1040nr online filing free   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. 1040nr online filing free A substantial economic relationship exists if together the properties were one economic unit. 1040nr online filing free You also must show that the condemned property could not reasonably or adequately be replaced. 1040nr online filing free You can elect to postpone reporting the gain by buying replacement property. 1040nr online filing free See Postponement of Gain, later. 1040nr online filing free Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. 1040nr online filing free If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. 1040nr online filing free You can postpone reporting gain from a condemnation if you buy replacement property. 1040nr online filing free If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. 1040nr online filing free See Postponement of Gain, later. 1040nr online filing free If your net condemnation award is less than your adjusted basis, you have a loss. 1040nr online filing free If your loss is from property you held for personal use, you cannot deduct it. 1040nr online filing free You must report any deductible loss in the tax year it happened. 1040nr online filing free You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. 1040nr online filing free Main home condemned. 1040nr online filing free   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. 1040nr online filing free You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). 1040nr online filing free For information on this exclusion, see Publication 523. 1040nr online filing free If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. 1040nr online filing free See Postponement of Gain, later. 1040nr online filing free Table 1-3. 1040nr online filing free Worksheet for Condemnations Part 1. 1040nr online filing free Gain from severance damages. 1040nr online filing free  If you did not receive severance damages, skip Part 1 and go to Part 2. 1040nr online filing free   1. 1040nr online filing free Enter gross severance damages received   2. 1040nr online filing free Enter your expenses in getting severance damages   3. 1040nr online filing free Subtract line 2 from line 1. 1040nr online filing free If less than zero, enter -0-   4. 1040nr online filing free Enter any special assessment on remaining property taken out of your award   5. 1040nr online filing free Net severance damages. 1040nr online filing free Subtract line 4 from line 3. 1040nr online filing free If less than zero, enter -0-   6. 1040nr online filing free Enter the adjusted basis of the remaining property   7. 1040nr online filing free Gain from severance damages. 1040nr online filing free Subtract line 6 from line 5. 1040nr online filing free If less than zero, enter -0-   8. 1040nr online filing free Refigured adjusted basis of the remaining property. 1040nr online filing free Subtract line 5 from line 6. 1040nr online filing free If less than zero, enter -0-   Part 2. 1040nr online filing free Gain or loss from condemnation award. 1040nr online filing free   9. 1040nr online filing free Enter the gross condemnation award received   10. 1040nr online filing free Enter your expenses in getting the condemnation award   11. 1040nr online filing free If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. 1040nr online filing free If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. 1040nr online filing free Otherwise, enter -0-   12. 1040nr online filing free Add lines 10 and 11   13. 1040nr online filing free Net condemnation award. 1040nr online filing free Subtract line 12 from line 9   14. 1040nr online filing free Enter the adjusted basis of the condemned property   15. 1040nr online filing free Gain from condemnation award. 1040nr online filing free If line 14 is more than line 13, enter -0-. 1040nr online filing free Otherwise, subtract line 14 from  line 13 and skip line 16   16. 1040nr online filing free Loss from condemnation award. 1040nr online filing free Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. 1040nr online filing free )   Part 3. 1040nr online filing free Postponed gain from condemnation. 1040nr online filing free  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. 1040nr online filing free )   17. 1040nr online filing free If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. 1040nr online filing free Otherwise, enter -0-   18. 1040nr online filing free If line 15 is more than zero, enter the amount from line 13. 1040nr online filing free Otherwise, enter -0-   19. 1040nr online filing free Add lines 17 and 18. 1040nr online filing free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. 1040nr online filing free Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. 1040nr online filing free Subtract line 20 from line 19. 1040nr online filing free If less than zero, enter -0-   22. 1040nr online filing free If you completed Part 1, add lines 7 and 15. 1040nr online filing free Otherwise, enter the amount from line 15. 1040nr online filing free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. 1040nr online filing free Recognized gain. 1040nr online filing free Enter the smaller of line 21 or line 22. 1040nr online filing free   24. 1040nr online filing free Postponed gain. 1040nr online filing free Subtract line 23 from line 22. 1040nr online filing free If less than zero, enter -0-   Condemnation award. 1040nr online filing free   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. 1040nr online filing free The award is also the amount you are paid for the sale of your property under threat of condemnation. 1040nr online filing free Payment of your debts. 1040nr online filing free   Amounts taken out of the award to pay your debts are considered paid to you. 1040nr online filing free Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. 1040nr online filing free Example. 1040nr online filing free The state condemned your property for public use. 1040nr online filing free The award was set at $200,000. 1040nr online filing free The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. 1040nr online filing free You are considered to have received the entire $200,000 as a condemnation award. 1040nr online filing free Interest on award. 1040nr online filing free   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. 1040nr online filing free You must report the interest separately as ordinary income. 1040nr online filing free Payments to relocate. 1040nr online filing free   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. 1040nr online filing free Do not include them in your income. 1040nr online filing free Replacement housing payments used to buy new property are included in the property's basis as part of your cost. 1040nr online filing free Net condemnation award. 1040nr online filing free   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. 1040nr online filing free If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. 1040nr online filing free This is discussed later under Special assessment taken out of award. 1040nr online filing free Severance damages. 1040nr online filing free    Severance damages are not part of the award paid for the property condemned. 1040nr online filing free They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. 1040nr online filing free   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. 1040nr online filing free Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. 1040nr online filing free   The contracting parties should agree on the specific amount of severance damages in writing. 1040nr online filing free If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. 1040nr online filing free   You cannot make a completely new allocation of the total award after the transaction is completed. 1040nr online filing free However, you can show how much of the award both parties intended for severance damages. 1040nr online filing free The severance damages part of the award is determined from all the facts and circumstances. 1040nr online filing free Example. 1040nr online filing free You sold part of your property to the state under threat of condemnation. 1040nr online filing free The contract you and the condemning authority signed showed only the total purchase price. 1040nr online filing free It did not specify a fixed sum for severance damages. 1040nr online filing free However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. 1040nr online filing free You may treat this part as severance damages. 1040nr online filing free Treatment of severance damages. 1040nr online filing free   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. 1040nr online filing free Use them to reduce the basis of the remaining property. 1040nr online filing free If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. 1040nr online filing free   If your net severance damages are more than the basis of your retained property, you have a gain. 1040nr online filing free You may be able to postpone reporting the gain. 1040nr online filing free See Postponement of Gain, later. 1040nr online filing free    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. 1040nr online filing free Net severance damages. 1040nr online filing free   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. 1040nr online filing free You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. 1040nr online filing free The balance is your net severance damages. 1040nr online filing free Expenses of obtaining a condemnation award and severance damages. 1040nr online filing free   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. 1040nr online filing free Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. 1040nr online filing free If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. 1040nr online filing free Example. 1040nr online filing free You receive a condemnation award and severance damages. 1040nr online filing free One-fourth of the total was designated as severance damages in your agreement with the condemning authority. 1040nr online filing free You had legal expenses for the entire condemnation proceeding. 1040nr online filing free You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. 1040nr online filing free You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. 1040nr online filing free Special assessment retained out of award. 1040nr online filing free   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. 1040nr online filing free An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. 1040nr online filing free Examples of improvements that may cause a special assessment are widening a street and installing a sewer. 1040nr online filing free   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. 1040nr online filing free Example. 1040nr online filing free To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. 1040nr online filing free You were awarded $5,000 for this and spent $300 to get the award. 1040nr online filing free Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. 1040nr online filing free The city then paid you only $4,300. 1040nr online filing free Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). 1040nr online filing free If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). 1040nr online filing free The net award would not change, even if you later paid the assessment from the amount you received. 1040nr online filing free Severance damages received. 1040nr online filing free   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. 1040nr online filing free Any balance of the special assessment is used to reduce the condemnation award. 1040nr online filing free Example. 1040nr online filing free You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. 1040nr online filing free You spent $300 to obtain the severance damages. 1040nr online filing free A special assessment of $800 was retained out of the award. 1040nr online filing free The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. 1040nr online filing free Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. 1040nr online filing free Part business or rental. 1040nr online filing free   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. 1040nr online filing free Figure your gain or loss separately because gain or loss on each part may be treated differently. 1040nr online filing free   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. 1040nr online filing free Example. 1040nr online filing free You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. 1040nr online filing free You rented half the building and lived in the other half. 1040nr online filing free You paid $25,000 for the building and spent an additional $1,000 for a new roof. 1040nr online filing free You claimed allowable depreciation of $4,600 on the rental half. 1040nr online filing free You spent $200 in legal expenses to obtain the condemnation award. 1040nr online filing free Figure your gain or loss as follows. 1040nr online filing free     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. 1040nr online filing free Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. 1040nr online filing free Your basis for the new property is the same as your basis for the old. 1040nr online filing free Money or unlike property received. 1040nr online filing free   You ordinarily must report the gain if you receive money or unlike property. 1040nr online filing free You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. 1040nr online filing free You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. 1040nr online filing free See Controlling interest in a corporation, later. 1040nr online filing free   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. 1040nr online filing free If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. 1040nr online filing free   The basis of the replacement property is its cost, reduced by the postponed gain. 1040nr online filing free Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. 1040nr online filing free See Controlling interest in a corporation, later. 1040nr online filing free You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. 1040nr online filing free Postponing gain on severance damages. 1040nr online filing free   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. 1040nr online filing free See Treatment of severance damages, earlier. 1040nr online filing free You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). 1040nr online filing free   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. 1040nr online filing free If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. 1040nr online filing free   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. 1040nr online filing free Postponing gain on the sale of related property. 1040nr online filing free   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. 1040nr online filing free You must meet the requirements explained earlier under Related property voluntarily sold. 1040nr online filing free You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). 1040nr online filing free Buying replacement property from a related person. 1040nr online filing free   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. 1040nr online filing free For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. 1040nr online filing free   This rule applies to the following taxpayers. 1040nr online filing free C corporations. 1040nr online filing free Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. 1040nr online filing free All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. 1040nr online filing free   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. 1040nr online filing free If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. 1040nr online filing free If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. 1040nr online filing free Exception. 1040nr online filing free   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. 1040nr online filing free Advance payment. 1040nr online filing free   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). 1040nr online filing free Replacement property. 1040nr online filing free   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. 1040nr online filing free You do not have to use the actual funds from the condemnation award to acquire the replacement property. 1040nr online filing free Property you acquire by gift or inheritance does not qualify as replacement property. 1040nr online filing free Similar or related in service or use. 1040nr online filing free   Your replacement property must be similar or related in service or use to the property it replaces. 1040nr online filing free   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. 1040nr online filing free For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. 1040nr online filing free Owner-user. 1040nr online filing free   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. 1040nr online filing free Example. 1040nr online filing free Your home was condemned and you invested the proceeds from the condemnation in a grocery store. 1040nr online filing free Your replacement property is not similar or related in service or use to the condemned property. 1040nr online filing free To be similar or related in service or use, your replacement property must also be used by you as your home. 1040nr online filing free Owner-investor. 1040nr online filing free   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. 1040nr online filing free You decide this by determining all the following information. 1040nr online filing free Whether the properties are of similar service to you. 1040nr online filing free The nature of the business risks connected with the properties. 1040nr online filing free What the properties demand of you in the way of management, service, and relations to your tenants. 1040nr online filing free Example. 1040nr online filing free You owned land and a building you rented to a manufacturing company. 1040nr online filing free The building was condemned. 1040nr online filing free During the replacement period, you had a new building built on other land you already owned. 1040nr online filing free You rented out the new building for use as a wholesale grocery warehouse. 1040nr online filing free The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. 1040nr online filing free Your management activities. 1040nr online filing free The amount and kind of services you provide to your tenants. 1040nr online filing free The nature of your business risks connected with the properties. 1040nr online filing free Leasehold replaced with fee simple property. 1040nr online filing free   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. 1040nr online filing free   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. 1040nr online filing free A leasehold is property held under a lease, usually for a term of years. 1040nr online filing free Outdoor advertising display replaced with real property. 1040nr online filing free   You can elect to treat an outdoor advertising display as real property. 1040nr online filing free If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. 1040nr online filing free For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. 1040nr online filing free   You can make this election only if you did not claim a section 179 deduction for the display. 1040nr online filing free You cannot cancel this election unless you get the consent of the IRS. 1040nr online filing free   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. 1040nr online filing free Substituting replacement property. 1040nr online filing free   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. 1040nr online filing free But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. 1040nr online filing free Controlling interest in a corporation. 1040nr online filing free   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. 1040nr online filing free You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. 1040nr online filing free Basis adjustment to corporation's property. 1040nr online filing free   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. 1040nr online filing free You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). 1040nr online filing free   Allocate this reduction to the following classes of property in the order shown below. 1040nr online filing free Property that is similar or related in service or use to the condemned property. 1040nr online filing free Depreciable property not reduced in (1). 1040nr online filing free All other property. 1040nr online filing free If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. 1040nr online filing free The reduced basis of any single property cannot be less than zero. 1040nr online filing free Main home replaced. 1040nr online filing free   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. 1040nr online filing free The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. 1040nr online filing free   You must reduce the basis of your replacement property by the postponed gain. 1040nr online filing free Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. 1040nr online filing free Example. 1040nr online filing free City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. 1040nr online filing free The city paid you a condemnation award of $400,000. 1040nr online filing free Your adjusted basis in the property was $80,000. 1040nr online filing free You realize a gain of $320,000 ($400,000 − $80,000). 1040nr online filing free You purchased a new home for $100,000. 1040nr online filing free You can exclude $250,000 of the realized gain from your gross income. 1040nr online filing free The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). 1040nr online filing free You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). 1040nr online filing free The remaining $20,000 of realized gain is postponed. 1040nr online filing free Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). 1040nr online filing free Replacement period. 1040nr online filing free   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. 1040nr online filing free This is the replacement period. 1040nr online filing free   The replacement period for a condemnation begins on the earlier of the following dates. 1040nr online filing free The date on which you disposed of the condemned property. 1040nr online filing free The date on which the threat of condemnation began. 1040nr online filing free   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. 1040nr online filing free However, see the exceptions below. 1040nr online filing free Three-year replacement period for certain property. 1040nr online filing free   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. 1040nr online filing free However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. 1040nr online filing free Five-year replacement period for certain property. 1040nr online filing free   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. 1040nr online filing free Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. 1040nr online filing free Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. 1040nr online filing free Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. 1040nr online filing free Extended replacement period for taxpayers affected by other federally declared disasters. 1040nr online filing free    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. 1040nr online filing free For more information visit www. 1040nr online filing free irs. 1040nr online filing free gov/uac/Tax-Relief-in-Disaster-Situations. 1040nr online filing free Weather-related sales of livestock in an area eligible for federal assistance. 1040nr online filing free   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. 1040nr online filing free    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. 1040nr online filing free See Notice 2006-82. 1040nr online filing free You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. 1040nr online filing free irs. 1040nr online filing free gov/irb/2006-39_IRB/ar13. 1040nr online filing free html. 1040nr online filing free    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. 1040nr online filing free If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. 1040nr online filing free You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. 1040nr online filing free irs. 1040nr online filing free gov/irb/2013-45_IRB/ar04. 1040nr online filing free html. 1040nr online filing free The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. 1040nr online filing free Determining when gain is realized. 1040nr online filing free   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. 1040nr online filing free If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. 1040nr online filing free   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. 1040nr online filing free A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. 1040nr online filing free   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. 1040nr online filing free All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. 1040nr online filing free All or part of the award is actually or constructively received. 1040nr online filing free For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. 1040nr online filing free Replacement property bought before the condemnation. 1040nr online filing free   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. 1040nr online filing free Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. 1040nr online filing free Example. 1040nr online filing free On April 3, 2012, city authorities notified you that your property would be condemned. 1040nr online filing free On June 5, 2012, you acquired property to replace the property to be condemned. 1040nr online filing free You still had the new property when the city took possession of your old property on September 4, 2013. 1040nr online filing free You have made a replacement within the replacement period. 1040nr online filing free Extension. 1040nr online filing free   You can request an extension of the replacement period from the IRS director for your area. 1040nr online filing free You should apply before the end of the replacement period. 1040nr online filing free Your request should explain in detail why you need an extension. 1040nr online filing free The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. 1040nr online filing free An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. 1040nr online filing free   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. 1040nr online filing free Extensions are usually limited to a period of 1 year or less. 1040nr online filing free The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. 1040nr online filing free If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri