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1040x online 37. 1040x online   Otros Créditos Table of Contents Qué Hay de Nuevo Introduction Useful Items - You may want to see: Créditos no ReembolsablesCrédito por Adopción Crédito por Vehículo Motorizado Alternativo Crédito por Bienes de Reabastecimiento de Vehículos con Combustible Alternativo Crédito para Titulares de Bonos de Crédito Tributario Crédito por Impuestos Extranjeros Crédito por Intereses Hipotecarios Crédito no Reembolsable del Impuesto Mínimo de Años Anteriores Crédito por Vehículos Enchufables con Motor de Dirección Eléctrica Créditos por Energía de la Propiedad Residencial Crédito por Aportaciones a Cuentas de Ahorro para la Jubilación (Crédito del Ahorrador) Créditos ReembolsablesCrédito por el Impuesto sobre Ganancias de Capital no Distribuidas Crédito Tributario por Cobertura del Seguro Médico Crédito por Retención en Exceso del Impuesto del Seguro Social o del Impuesto de la Jubilación Ferroviaria Qué Hay de Nuevo Crédito por adopción. 1040x online . 1040x online  El crédito máximo por adopción es $12,970 para el año 2013. 1040x online Vea Crédito por Adopción . 1040x online Crédito por vehículo electrónico enchufable. 1040x online  El crédito por vehículos electrónicos enchufables ha vencido. 1040x online Crédito reembolsable del impuesto mínimo de años anteriores. 1040x online   La parte reembolsable del crédito del impuesto mínimo alternativo de años anteriores ha vencido. 1040x online Retención en exceso de los impuestos al Seguro Social y a la jubilación ferroviaria. 1040x online . 1040x online  Tanto los impuestos al Seguro Social como los impuestos del nivel 1 de jubilación ferroviaria (RRTA, por sus siglas en inglés) fueron retenidos de los salarios hasta el límite de $113,700 a una tasa de 6. 1040x online 2% durante 2013. 1040x online Si durante 2013, usted trabajó para más de un empleador y se le retuvo demasiado impuesto al Seguro Social o de jubilación ferroviaria, podría tener derecho a un crédito por la retención en exceso. 1040x online Vea Crédito por Retención en Exceso del Impuesto del Seguro Social o deI Impuesto de la Jubilación Ferroviaria . 1040x online Introduction Este capítulo trata de los siguientes créditos no reembolsables: Crédito por adopción. 1040x online Crédito por vehículo motorizado alternativo. 1040x online Crédito por bienes de reabastecimiento de vehículos con combustible alternativo. 1040x online Crédito para titulares de bonos de crédito tributario. 1040x online Crédito por impuestos extranjeros. 1040x online Crédito por intereses hipotecarios. 1040x online Crédito no reembolsable del impuesto mínimo de años anteriores. 1040x online Crédito por vehículos enchufables con motor de dirección eléctrica. 1040x online Créditos por energía de la propiedad residencial. 1040x online Crédito por aportaciones a arreglos de ahorros para la jubilación. 1040x online Este capítulo trata también de los siguientes créditos reembolsables: Crédito por el impuesto sobre ganancias de capital no distribuidas. 1040x online Crédito tributario por cobertura del seguro médico. 1040x online Crédito por retención en exceso del impuesto del Seguro Social o del impuesto de la jubilación ferroviaria. 1040x online En otros capítulos de esta publicación, se explican otros créditos. 1040x online Crédito por gastos del cuidado de menores y dependientes (capítulo 32). 1040x online Crédito para ancianos o personas incapacitadas (capítulo 33). 1040x online Crédito tributario por hijos (capítulo 34). 1040x online Créditos tributarios por estudios (capítulo 35). 1040x online Crédito por ingreso del trabajo (capítulo 36). 1040x online Créditos no reembolsables. 1040x online   La primera parte de este capítulo, Créditos no Reembolsables , abarca diez créditos que se restan de sus impuestos. 1040x online Puede ser que estos créditos reduzcan los impuestos a cero. 1040x online Si estos créditos superan el total de sus impuestos, no se le devuelve el excedente. 1040x online Créditos reembolsables. 1040x online   La segunda parte de este capítulo, Créditos Reembolsables , abarca tres créditos que se consideran pagos y que le pueden ser reembolsados. 1040x online Estos créditos se agregan a los impuestos federales sobre el ingreso retenidos y todo pago de impuesto estimado que haya hecho. 1040x online Si el total de éstos es superior al total de los impuestos, se le reembolsará el excedente. 1040x online Useful Items - You may want to see: Publicación 502 Medical and Dental Expenses (Gastos médicos y dentales), en inglés 514 Foreign Tax Credit for Individuals (Crédito por impuestos del extranjero para personas físicas), en inglés 530 Tax Information for Homeowners (Información tributaria para propietarios de vivienda), en inglés 590 Individual Retirement Arrangements (IRAs) (Arreglos de ahorros para la jubilación (Arreglos IRA)), en inglés Formulario (e Instrucciones) 1116 Foreign Tax Credit (Crédito por impuestos extranjeros), en inglés 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains (Aviso al accionista de ganancias de capital a largo plazo no distribuidas), en inglés 5695 Residential Energy Credits (Créditos por energía de la propiedad residencial), en inglés 8396 Mortgage Interest Credit (Crédito por intereses hipotecarios), en inglés 8801 Credit For Prior Year Minimum Tax – Individuals, Estates, and Trusts (Crédito del impuesto mínimo de años anteriores–personas físicas, caudales hereditarios o fideicomisos), en inglés 8828 Recapture of Federal Mortgage Subsidy (Recuperación del subsidio hipotecario federal), en inglés 8839 Qualified Adoption Expenses (Gastos de adopción calificados), en inglés 8880 Credit for Qualified Retirement Savings Contributions (Crédito por aportaciones calificadas a arreglos de ahorros para la jubilación), en inglés 8885 Health Coverage Tax Credit (Crédito tributario por cobertura del seguro médico), en inglés 8910 Alternative Motor Vehicle Credit (Crédito por vehículo motorizado alternativo), en inglés 8911 Alternative Fuel Vehicle Refueling Property Credit (Crédito por bienes de reabastecimiento de vehículos de combustible alternativo), en inglés 8912 Credit to Holders of Tax Credit Bonds (Crédito para titulares de bonos de crédito tributario), en inglés 8936 Qualified Plug-In Electric Drive Motor Vehicle Credit (Crédito por vehículos enchufables con motor de dirección eléctrica que reúnen los requisitos), en inglés Créditos no Reembolsables Los créditos tratados en esta parte del capítulo pueden reducir los impuestos. 1040x online No obstante, si el total de estos créditos supera el total de sus impuestos, no se le devuelve el excedente. 1040x online Crédito por Adopción Tal vez pueda tomar un crédito tributario de hasta $12,970 por gastos calificados que se hayan pagado para adoptar a un niño que reúna los requisitos. 1040x online El crédito podría permitirse en el caso de la adopción de un niño con necesidades especiales aunque usted no tenga gastos calificados. 1040x online El crédito se reduce si tiene ingresos brutos modificados (MAGI, por sus siglas en inglés) mayores de $194,580. 1040x online Si tiene ingresos brutos modificados iguales o mayores de $234,580 no puede reclamar el crédito. 1040x online Gastos de adopción calificados. 1040x online   Los gastos de adopción calificados son gastos razonables y necesarios directamente relacionados con la adopción legal de un hijo que reúna los requisitos y cuyo fin sea la adopción legal. 1040x online Dichos gastos abarcan: Honorarios de adopción, Costos judiciales, Honorarios de abogado, Gastos de viaje (incluyendo gastos de comida y alojamiento) mientras esté fuera de casa y Gastos de readopción para adoptar a un niño extranjero. 1040x online Gastos no calificados. 1040x online   Los gastos de adopción calificados no abarcan gastos: Que infrinjan la ley estatal o federal, Para llevar a cabo un acuerdo para autorizar los cuidados de un tutor (o padre sustituto), Por la adopción del hijo de su cónyuge, Para los cuales haya recibido fondos conforme a algún programa federal, estatal o local, Permitidos como crédito o deducción conforme a algún otro requisito de los impuestos federales sobre el ingreso o Pagados o reembolsados por su empleador o alguna otra persona u organización. 1040x online Hijo que reúne los requisitos. 1040x online   El término “hijo que reúne los requisitos” designa a toda persona que: Tenga menos de 18 años de edad o Esté física o mentalmente incapacitada para cuidar de sí misma. 1040x online Hijo con necesidades especiales. 1040x online   Un hijo con necesidades especiales reúne los requisitos si se dan las tres condiciones siguientes: El hijo fue ciudadano o residente de los Estados Unidos (incluyendo posesiones (territorios no autónomos) de los EE. 1040x online UU. 1040x online ) al iniciarse los trámites de adopción. 1040x online Un estado (incluido el Distrito de Columbia) ha determinado que el hijo no puede o no debe ser devuelto al hogar de sus padres. 1040x online El estado ha decidido que el hijo no puede ser adoptado a no ser que se les proporcione ayuda a los padres adoptivos. 1040x online Los factores que los estados usan para llegar a esta determinación incluyen los siguientes: El origen étnico del hijo, La edad del hijo, Si el hijo es miembro de un grupo de minoría o tiene hermanos o hermanas y Si el hijo padece de una afección médica o un impedimento físico, mental o emocional. 1040x online Cuándo reclamar el crédito. 1040x online   Generalmente, hasta finalizar la adopción, se toma el crédito en el año siguiente al año en el que se hayan ocasionado o pagado los gastos calificados. 1040x online Si se concluye el proceso de adopción, reclame el crédito en el año en el que se hayan ocasionado o pagado los gastos. 1040x online Vea las Instrucciones del Formulario 8839 para más información sobre cuándo se debe reclamar el crédito. 1040x online Hijo extranjero. 1040x online   Si el hijo no es ciudadano o residente de los EE. 1040x online UU. 1040x online al empezar los trámites de adopción, usted no puede reclamar el crédito a menos que concluya el proceso de adopción. 1040x online Todo gasto de adopción que se haya ocasionado o pagado en años anteriores al finalizar el proceso de adopción se considera ocasionado o pagado en el año en que se concluya dicho proceso. 1040x online Cómo reclamar el crédito. 1040x online   Calcule su crédito no reembolsable de 2013 y cualquier crédito que está traspasando a el 2014 en el Formulario 8839 y adjúntelo a su Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque la casilla c y anote “8839” en la línea que se encuentra junto a esa casilla. 1040x online Más información. 1040x online   Para información adicional, vea las Instrucciones del Formulario 8839, en inglés. 1040x online Crédito por Vehículo Motorizado Alternativo Quizás pueda reclamar este crédito si pone en uso un vehículo motorizado de pila de combustible calificado en 2013. 1040x online Cantidad del crédito. 1040x online   Generalmente, puede basarse en la certificación del fabricante al IRS para saber si un vehículo de cierta marca, modelo y año reúne los requisitos para el crédito y para la cantidad máxima del mismo por el cual reúne los requisitos. 1040x online Si se trata de un fabricante extranjero, por lo general, puede basarse en la certificación de su distribuidor nacional al IRS. 1040x online    Normalmente, la cantidad del crédito suele ser el 100% del crédito máximo permisible tal y como lo certifique el fabricante (o el distribuidor nacional al IRS). 1040x online Cómo reclamar el crédito. 1040x online   Para tomar el crédito, tiene que completar el Formulario 8910 y adjuntarlo al Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque el recuadro c y anote “8910” en la línea al lado de dicho recuadro. 1040x online Información adicional. 1040x online   Para más información sobre el crédito, vea las Instrucciones del Formulario 8910. 1040x online Crédito por Bienes de Reabastecimiento de Vehículos con Combustible Alternativo Tal vez pueda tomar un crédito si pone en uso en 2013 bienes de reabastecimiento de vehículos con combustible alternativo calificados. 1040x online Bienes de reabastecimiento de vehículos de combustible alternativo calificados. 1040x online   Los bienes de reabastecimiento de vehículos de combustible alternativo calificados son aquéllos (que no sean edificios ni los componentes estructurales de los mismos) que se utilicen para cualquiera de los siguientes: Para almacenar o surtir un combustible alternativo en el tanque de combustible de un vehículo de motor propulsado por dicho combustible, pero sólo si el proceso de almacenamiento o reabastecimiento se lleva a cabo en el sitio donde el combustible se coloca en ese tanque. 1040x online Para recargar un vehículo eléctrico, pero sólo si la propiedad de recarga se encuentra en el lugar donde se recarga el vehículo. 1040x online   Los siguientes son combustibles alternativos: Todo combustible del cual por lo menos el 85% del volumen consiste en uno o más de los siguientes: etanol, gas natural, gas natural comprimido, gas natural licuado, gas licuado de petróleo o hidrógeno. 1040x online Toda mezcla que consista en dos o más de los siguientes: biodiésel, gasóleo (gasolina diésel) o queroseno y de la cual por lo menos el 20% del volumen consiste en biodiésel según determinado sin tener en cuenta cantidad alguna de queroseno. 1040x online Electricidad. 1040x online Cantidad del crédito. 1040x online   Para bienes de uso personal, el crédito suele ser la cantidad menor entre el 30% del costo de dichos bienes o $1,000. 1040x online Para bienes de uso comercial, el crédito suele ser la cantidad menor entre el 30% del costo de dichos bienes o $30,000. 1040x online Cómo reclamar el crédito. 1040x online   Para tomar el crédito, tiene que completar el Formulario 8911 y adjuntarlo al Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque el recuadro c y anote “8911” en la línea al lado de dicho recuadro. 1040x online Información adicional. 1040x online   Para más información sobre el crédito, vea las instrucciones del Formulario 8911, en inglés. 1040x online Crédito para Titulares de Bonos de Crédito Tributario Los bonos de crédito tributario son bonos de los cuales el titular recibe un crédito tributario en vez de los intereses sobre el bono, o una parte de los mismos. 1040x online Tal vez pueda reclamar un crédito si es titular de uno de los siguientes bonos: Bonos de energía limpia y renovable (emitidos antes de 2010). 1040x online Bonos de energía limpia y renovable nuevos. 1040x online Bonos calificados de ahorro de energía. 1040x online Bonos calificados de construcción de escuelas. 1040x online Bonos para zonas de academia calificadas. 1040x online Bonos de construcción de proyectos públicos en los Estados Unidos (Bonos Build America). 1040x online En algunos casos, un emisor puede optar por recibir un crédito correspondiente a los intereses pagados sobre el bono. 1040x online Si el emisor elige esta opción, usted no puede también reclamar un crédito. 1040x online Ingresos procedentes de intereses. 1040x online   La cantidad de todo crédito tributario permitido (calculado antes de aplicarse los límites de responsabilidad tributaria) se tiene que incluir en la declaración como ingresos procedentes de intereses. 1040x online Cómo reclamar el crédito. 1040x online   Complete el Formulario 8912 y adjúntelo al Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque el recuadro c y anote “8912” en la línea al lado de dicho recuadro. 1040x online Información adicional. 1040x online   Para más información, vea las Instrucciones del Formulario 8912, en inglés. 1040x online Crédito por Impuestos Extranjeros Generalmente, puede optar por declarar un crédito por los impuestos sobre el ingreso pagados o acumulados por usted a lo largo del año a un país extranjero o posesión (territorio no autónomo) de los Estados Unidos, aplicándolo como crédito contra el impuesto sobre el ingreso de los Estados Unidos. 1040x online O puede deducirlos como una deducción detallada (vea el capítulo 22). 1040x online No puede reclamar un crédito (ni una deducción) por impuestos sobre el ingreso extranjero pagado sobre ingresos que se excluyan del impuesto de los EE. 1040x online UU. 1040x online en los siguientes casos: Exclusión de ingresos ganados de fuentes en el extranjero. 1040x online Exclusión por concepto de vivienda en el extranjero. 1040x online Ingresos de fuentes en Puerto Rico exentos de impuestos de los Estados Unidos. 1040x online Exclusión en las posesiones (territorios no autónomos) de los Estados Unidos. 1040x online Límite del crédito. 1040x online   A menos que decida no presentar el Formulario 1116 (vea Excepción , más adelante), el crédito por impuestos extranjeros pagados no puede superar los impuestos a pagar al gobierno de los Estados Unidos (línea 44 del Formulario 1040), multiplicados por una fracción. 1040x online El numerador de esta fracción será los ingresos tributables de fuentes fuera de los Estados Unidos. 1040x online El denominador será el total de los ingresos tributables de fuentes en los Estados Unidos y en el extranjero. 1040x online Vea la Publicación 514, en inglés, para más información. 1040x online Cómo reclamar el crédito. 1040x online   Complete el Formulario 1116 y adjúntelo al Formulario 1040. 1040x online Anote el crédito en la línea 47 del Formulario 1040. 1040x online Excepción. 1040x online   No necesita llenar el Formulario 1116 para reclamar el crédito si se dan todas las siguientes condiciones: Todos sus ingresos brutos de fuentes en el extranjero provienen de intereses y dividendos y dichos ingresos en su totalidad más los impuestos extranjeros que se pagaron sobre esos ingresos se les informaron a usted en el Formulario 1099-INT, Formulario 1099-DIV o en el Anexo K-1 (o un documento similar sustitutivo). 1040x online Si usted tuvo ingreso de dividendos provenientes de participación en acciones, usted mantuvo en tenencia dichas acciones por lo menos 16 dias. 1040x online No está presentando el Formulario 4563 ni excluyendo ingresos provenientes de fuentes en Puerto Rico. 1040x online El total de los impuestos extranjeros no era superior a $300 ($600 si es casado que presenta una declaración conjunta). 1040x online Todos sus impuestos extranjeros fueron: Adeudados legalmente y no reunían los requisitos para un reembolso y Pagados a países que son reconocidos como tal por los Estados Unidos y que no apoyan el terrorismo. 1040x online Más información. 1040x online   Para información más detallada acerca del crédito y estos requisitos, vea las Instrucciones del Formulario 1116, en inglés. 1040x online Crédito por Intereses Hipotecarios El crédito por intereses hipotecarios tiene la finalidad de ayudar a personas de bajos recursos a comprar una vivienda. 1040x online Si reúne los requisitos, puede reclamar el crédito cada año para una parte de los intereses hipotecarios de vivienda que pague. 1040x online Quién reúne los requisitos. 1040x online   Tal vez pueda reclamar el crédito si un gobierno estatal o local le emitió un certificado de crédito hipotecario que reúne los requisitos (MCC, por sus siglas en inglés). 1040x online Generalmente, un MCC se emite sólo en relación con una nueva hipoteca para la compra de su vivienda principal. 1040x online Cantidad del crédito. 1040x online   Calcule su crédito en el Formulario 8396. 1040x online Si la cantidad del préstamo hipotecario es igual (o menor que) a la cantidad adeudada confirmada (préstamo) que aparece en el MCC, anote en la línea 1 del Formulario 8396 todos los intereses que haya pagado sobre la hipoteca durante el año. 1040x online   Si la cantidad del préstamo hipotecario es mayor que la cantidad adeudada confirmada que aparece en el MCC, puede calcular el crédito sólo sobre una parte de los intereses que haya pagado. 1040x online Para encontrar la cantidad que debe anotar en la línea 1, multiplique por la siguiente fracción el total de los intereses que haya pagado sobre una hipoteca a lo largo del año. 1040x online      Cantidad adeudada confirmada que aparece en el MCC     Cantidad original de la hipoteca      Límite basado en la tasa de crédito. 1040x online   Si la tasa de crédito del certificado es superior al 20%, el crédito que se le permita no puede sobrepasar $2,000. 1040x online Si dos o más personas (que no sean un matrimonio que presente una declaración conjunta) tienen una participación en la vivienda a la que se refiere el MCC, este límite de $2,000 tiene que dividirse según la participación de cada persona. 1040x online Vea la Publicación 530, en inglés, para información adicional. 1040x online Traspasos a un año posterior. 1040x online   El crédito (luego de aplicar el límite basado en la tasa de crédito) también está sujeto a un límite basado en el impuesto calculado en el Formulario 8396. 1040x online Si el crédito permitido disminuye a causa de este límite sobre los impuestos adeudados, puede traspasar la parte del crédito que no haya utilizado a los 3 próximos años o hasta que se utilice en su totalidad, lo que ocurra primero. 1040x online   Si está sujeto al límite de los $2,000 debido a que la tasa de crédito del certificado es superior al 20%, no puede traspasar a un año posterior ninguna cantidad superior a $2,000 (o, en el caso de que tenga que dividir el crédito, la parte de los $2,000 que le corresponda). 1040x online Cómo reclamar el crédito. 1040x online    Calcule el crédito de 2013, y toda cantidad que se haya traspasado a 2014, en el Formulario 8396 y adjúntelo al Formulario 1040. 1040x online Cerciórese de incluir todo crédito traspasado, correspondiente a 2010, 2011 y 2012. 1040x online   Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque el recuadro c y escriba “8396” en la línea al lado de dicho recuadro. 1040x online Reducción de la deducción por intereses sobre una hipoteca de vivienda. 1040x online   Si detalla sus deducciones en el Anexo A del Formulario 1040, tiene que restar la cantidad del crédito por intereses hipotecarios, indicada en la línea 3 del Formulario 8396, de la deducción por intereses sobre una hipoteca de vivienda. 1040x online Tiene que hacerlo aunque parte de dicha cantidad se traspase a 2014. 1040x online Para más información sobre la deducción por intereses sobre una hipoteca de vivienda, vea el capítulo 23. 1040x online Recuperación del subsidio hipotecario federal. 1040x online   Si recibió un MCC junto con el préstamo hipotecario, podría verse obligado a recuperar (reintegrar) todo o parte del beneficio que haya recibido de ese programa. 1040x online Se le podría exigir esta recuperación si vende o enajena su vivienda con ganancias durante los 9 años siguientes al cierre de su préstamo hipotecario. 1040x online Vea las Instrucciones para el Formulario 8828, disponibles en inglés, y el capítulo 15 para más información. 1040x online Más información. 1040x online   Para información más detallada acerca del crédito, vea las instrucciones del Formulario 8396, en inglés. 1040x online Crédito no Reembolsable del Impuesto Mínimo de Años Anteriores La ley tributaria concede un trato especial a ciertos tipos de ingresos y permite deducciones y créditos especiales para algunos tipos de gastos. 1040x online Si se beneficia de estas leyes, podría verse obligado a pagar por lo menos una cantidad mínima de impuestos además de cualquier otro impuesto sobre estas partidas. 1040x online A esto se le llama impuesto mínimo alternativo (AMT, por sus siglas en inglés). 1040x online El trato especial de ciertas partidas de ingresos y gastos sólo le permite aplazar el pago de los impuestos hasta un año posterior. 1040x online Si pagó el impuesto mínimo alternativo en años anteriores a causa de estas partidas tributarias postergadas, tal vez pueda reclamar un crédito por el impuesto mínimo de años anteriores, a favor del impuesto habitual del año en curso. 1040x online Quizás pueda reclamar un crédito y aplicarlo a favor del impuesto habitual si en 2012 tuvo: Impuesto mínimo alternativo adeudado y ajustes o partidas con beneficio tributario que no sean conceptos a excluirse, Un crédito del impuesto mínimo que traspase a 2013 o Un crédito no permitido por vehículos eléctricos calificados. 1040x online Cómo reclamar el crédito. 1040x online    Calcule el crédito no reembolsable de 2013 (de haberlo), y toda cantidad que se haya traspasado a 2014, en el Formulario 8801 y adjúntelo al Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040 y marque el recuadro b. 1040x online Puede traspasar a años posteriores, hasta agotarlo, todo crédito del impuesto mínimo de años anteriores que no se haya utilizado. 1040x online Información adicional. 1040x online   Para más información sobre el crédito, vea las Instrucciones del Formulario 8801, en inglés. 1040x online Crédito por Vehículos Enchufables con Motor de Dirección Eléctrica Es posible que pueda tomar este crédito si, en 2013, puso en uso por fines de negocios o personales un vehículo enchufable con motor de dirección eléctrica o un vehículo eléctrico enchufable de dos o tres ruedas y dicho vehículo reúne los requisitos. 1040x online Vehículos enchufables con motor de dirección eléctrica y que reúnen los requisitos. 1040x online   El vehículo reúne los requisitos si es un vehículo nuevo con, por lo menos, cuatro llantas que: Es impulsado en su mayoría por un motor eléctrico que funciona con electricidad generada por una batería que tenga una capacidad de no menos de 4 kilovatios-horas y se puede recargar mediante una fuente externa de energía y El peso bruto del vehículo es menos de 14,000 libras. 1040x online Vehículos eléctricos enchufables de dos o tres ruedas que reúnen los requisitos. 1040x online   El vehículo reúne los requisitos si es un vehículo nuevo con dos o tres ruedas que: Tiene la capacidad de llegar a una velocidad de 45 millas por hora o más, Es impulsado en su mayoría por un motor eléctrico que funciona con electricidad generada por una batería que tenga una capacidad de no menos de 2. 1040x online 5 kilovatios-horas y se puede recargar mediante una fuente externa de energía y El peso bruto del vehículo es menos de 14,000 libras. 1040x online Certificación y otros requisitos   Generalmente, puede basarse en la certificación del fabricante al IRS (o en el caso de un fabricante extranjero, en la certificación del distribuidor doméstico) para saber si la marca, modelo y años específicos de un vehículo reúnen los requisitos del crédito y, si es aplicable, la cantidad del crédito para el cual califica. 1040x online Sin embargo, si el IRS publica un aviso anunciando que la certificación de alguna marca, modelo y año ha sido retirada, usted no puede basarse en la certificación del vehículo si fue comprado después de la fecha de la publicación del aviso del retiro. 1040x online   También tiene que cumplir los requisitos siguientes para calificar para el crédito: Usted es el dueño del vehículo. 1040x online Si el vehículo es arrendado, sólo el arrendador, y no el arrendatario, tiene derecho al crédito. 1040x online El vehículo fue puesto en servicio en 2013. 1040x online El vehículo es fabricado principalmente para uso en calles, caminos y carreteras públicas. 1040x online El uso original del vehículo comenzó con usted. 1040x online Adquirió el vehículo para utilizarlo usted mismo o para el arrendamiento a un tercero y no para revenderlo. 1040x online En el caso de un vehículo eléctrico enchufable de dos o tres ruedas que reúna los requisitos, el vehículo tiene que haber sido adquirido después de 2011 y antes de 2014. 1040x online Utiliza el vehículo principalmente en los Estados Unidos. 1040x online Cómo reclamar el crédito. 1040x online   Para tomar el crédito, tiene que completar el Formulario 8936 y adjuntarlo a su Formulario 1040. 1040x online Incluya el crédito en el total de la línea 53 del Formulario 1040. 1040x online Marque el recuadro c y anote “8936” en la línea al lado de dicho recuadro. 1040x online    Más información. 1040x online   Para más información acerca del crédito, vea las instrucciones del Formulario 8936, en inglés. 1040x online Créditos por Energía de la Propiedad Residencial Podría tener derecho a uno o los dos siguientes créditos si hizo mejoras para conservar energía en su vivienda ubicada en los Estados Unidos en 2013. 1040x online Crédito tributario por energía de la propiedad no empresarial. 1040x online Crédito de eficiencia energética para propiedades residenciales. 1040x online Si es integrante de un comité de administración de condominios para un condominio del que sea dueño o inquilino-accionista de una sociedad anónima de cooperativa de viviendas, se considera que ha pagado la parte proporcionada que le corresponde de todo costo de tal comité o sociedad anónima para fines de estos créditos. 1040x online Crédito tributario por energía de la propiedad no empresarial. 1040x online   Tal vez pueda tomar un crédito igual a la suma de: El 10% de los costos pagados para mejoras de eficiencia energética instaladas en 2013 y Todo costo pagado o incurrido para energía de la propiedad residencial en 2013. 1040x online   Existe un límite vitalicio de $500 para todos los años posteriores al año 2005, de lo que sólo $200 pueden ser por ventanas; $50 por un ventilador de circulación de aire principal avanzado; $150 por un calentador de agua a base de gas natural propano o petróleo; y $300 por cualquier artículo de eficiencia energética para propiedades residenciales. 1040x online Si la cantidad total de los créditos tributarios por energía de la propiedad no empresarial que ha tomado en años previos (después del 2005) es más de $500, no puede tomar este crédito en el año 2013. 1040x online Las mejoras de eficiencia energética que reúnen los requisitos son las siguientes mejoras siempre y cuando sean nuevas, se espere que sigan en uso por lo menos 5 años y cumplan determinados requisitos de la eficiencia energética: Todo material aislante o sistema que haya sido diseñado expresa y principalmente para reducir la pérdida o el aumento de temperatura (calentamiento) en una vivienda. 1040x online Ventanas exteriores (incluidos tragaluces). 1040x online Puertas exteriores. 1040x online Todo techo de metal o asfalto que tenga capas pigmentadas o gránulos de enfriamiento adecuados que hayan sido diseñados expresa y principalmente para reducir el aumento de temperatura (calentamiento) de la vivienda. 1040x online Se considera que la propiedad de energía residencial es cualquiera de los siguientes aparatos: Determinados calentadores eléctricos de agua con bomba de calor, bombas de calor eléctricas, acondicionadores de aire centrales, calentadores de agua a gas natural, propano o petróleo; y estufas que consumen combustibles de biomasa. 1040x online Calderas de gas natural, propano o petróleo que reúnen los requisitos; y calderas de agua caliente a gas natural, propano o petróleo que reúnen los requisitos. 1040x online Determinados ventiladores de circulación de aire principal avanzados que sean componentes de las calderas de gas natural, propano o petróleo. 1040x online Crédito por energía eficaz de la propiedad residencial. 1040x online   Quizás pueda tomar un crédito del 30% de los costos de propiedad eléctrica de energía solar, propiedad de calentamiento de agua por energía solar, propiedad de pilas de combustible, propiedad eólica de menor tamaño y propiedad de bomba de calor geotérmico. 1040x online En el caso de costos pagados por propiedad de pilas de combustible que reúne los requisitos, la cantidad del crédito está limitada a $500 por cada medio kilovatio de capacidad de dicha propiedad. 1040x online Reducción en la base. 1040x online   Tiene que reducir la base de su vivienda por la cantidad de todo crédito permitido. 1040x online Cómo reclamar el crédito. 1040x online   Complete el Formulario 5695 y adjúntelo al Formulario 1040. 1040x online Anote el crédito en la línea 52 del Formulario 1040. 1040x online Información adicional. 1040x online   Para más información sobre estos créditos, vea las instrucciones del Formulario 5695, en inglés. 1040x online Crédito por Aportaciones a Cuentas de Ahorro para la Jubilación (Crédito del Ahorrador) Podría reclamar este crédito si usted, o su cónyuge si presenta una declaración conjunta, hizo: Aportaciones (que no sean reinversiones) a un arreglo IRA tradicional o un arreglo Roth IRA, Aplazamientos optativos a un plan conforme a la sección 401(k) o 403(b) (incluidas aportaciones a un arreglo designado Roth) o a un plan SEP, SIMPLE o plan gubernamental conforme a la sección 457, Aportaciones voluntarias del empleado a un plan de jubilación que reúna los requisitos (incluido el Thrift Savings Plan (Cuenta de Ahorros de Jubilación) para empleados del gobierno federal) o Aportaciones a un plan conforme a la sección 501(c)(18)(D). 1040x online No obstante, no puede reclamar el crédito si se da cualquiera de las siguientes situaciones: La cantidad de la línea 38 del Formulario 1040 o de la línea 22 del Formulario 1040A es mayor de $29,500 ($44,250 si es cabeza de familia; $59,000 si es casado que presenta una declaración conjunta). 1040x online La persona que hizo la aportación o el aplazamiento optativo que reúne los requisitos (a) nació después del 1 de enero de 1996, (b) ha sido declarado como dependiente en la declaración de impuestos de 2013 de otra persona o (c) era estudiante (se define a continuación). 1040x online Estudiante. 1040x online   Usted era estudiante si, durante alguna parte de cada uno de 5 meses del año natural de 2013: Estaba matriculado en una escuela como estudiante a tiempo completo o Tomó un curso a tiempo completo de capacitación agrícola ofrecido en terreno por una escuela o por una agencia del estado, condado o gobierno local. 1040x online Escuela. 1040x online   El término “escuela” abarca escuelas politécnicas, profesionales e industriales. 1040x online Una escuela no incluye un curso de capacitación en el trabajo, escuela por correspondencia, ni escuelas que ofrecen cursos sólo por Internet. 1040x online Cómo reclamar el crédito. 1040x online   Calcule el crédito en el Formulario 8880. 1040x online Anote el crédito en la línea 50 del Formulario 1040 o la línea 32 del Formulario 1040A y adjunte el Formulario 8880 a su declaración. 1040x online Más información. 1040x online   Para más información sobre el crédito, vea las instrucciones del Formulario 8880, disponibles en inglés. 1040x online Créditos Reembolsables Los créditos explicados en esta parte del capítulo se tratan como pagos de impuestos. 1040x online Si el total de estos créditos, impuestos federales sobre el ingreso retenidos y pagos de su impuesto estimado es mayor al total de sus impuestos, se le puede reembolsar el excedente. 1040x online Crédito por el Impuesto sobre Ganancias de Capital no Distribuidas Tiene que incluir en los ingresos toda cantidad que le hayan asignado sociedades inversionistas reglamentadas (comúnmente llamadas fondos mutuos) o sociedades de inversión inmobiliaria (REIT, por sus siglas en inglés) como distribuciones de ganancias de capital, aunque de hecho no la haya recibido. 1040x online Si el fondo mutuo o sociedad de inversión inmobiliaria pagó impuestos sobre la ganancia de capital, se le permite un crédito por los impuestos ya que se considera que usted lo pagó. 1040x online El fondo mutuo o sociedad de inversión inmobiliaria le enviará el Formulario 2439 indicando su parte de las ganancias de capital no distribuidas y los impuestos pagados, de haberlos. 1040x online Cómo reclamar el crédito. 1040x online   Para reclamar el crédito, adjunte la Copia B del Formulario 2439 a su Formulario 1040. 1040x online Incluya la cantidad de la casilla 2 de su Formulario 2439 en el total de la línea 71 del Formulario 1040 y marque la casilla a. 1040x online Más información. 1040x online   Vea Distribuciones de Ganancias de Capital , en el capítulo 8 para más información sobre ganancias de capital no distribuidas. 1040x online Crédito Tributario por Cobertura del Seguro Médico Tal vez pueda reclamar este crédito para cualquier mes en el que se cumplan todos los siguientes requisitos el primer día del mes: Tenía derecho, como beneficiario, a recibir pagos de asistencia de ajuste comercial (TAA, por sus siglas en inglés), pagos de asistencia alternativa de ajuste comercial (ATAA, por sus siglas en inglés), pagos de asistencia de ajuste comercial relacionados con el reempleo (RTAA, por sus siglas en inglés) o una pensión de la Pension Benefit Guaranty Corporation (Corporación de garantía de beneficios de pensiones o PBGC, por sus siglas en inglés, y definida más adelante); o si era un miembro calificado de la familia de uno de estos individuos cuando dicho individuo falleció o cuando se finalizó su divorcio con uno de estos individuos. 1040x online Usted y/o los miembros de su familia estaban cubiertos por un plan de seguro médico que reúne los requisitos y por el cual pagó la totalidad de las primas o su parte correspondiente directamente a dicho plan o al U. 1040x online S. 1040x online Treasury— HCTC (Tesoro de los Estados Unidos, Crédito por cobertura del seguro médico). 1040x online No estaba inscrito en la Parte A, B o C del seguro Medicare o estaba inscrito en el programa Medicare pero su familia reunió los requisitos para el HCTC. 1040x online No estaba inscrito en el programa Medicaid ni en el Children's Health Insurance Program (Programa de seguro médico para niños, (CHIP, por sus siglas en inglés)). 1040x online No estaba inscrito en el programa Federal Employees Health Benefits (Seguro médico para empleados federales o FEHBP, por sus siglas en inglés) ni tenía derecho a recibir beneficios conforme al sistema médico militar de los EE. 1040x online UU. 1040x online (conocido en inglés como TRICARE). 1040x online No estaba encarcelado por las autoridades federales, estatales o locales. 1040x online Su empleador no pagó el 50% o más del costo de la cobertura. 1040x online No recibió una reducción del 65% de una prima de COBRA de parte de su antiguo empleador o administrador de COBRA. 1040x online Sin embargo, no puede tomar el crédito si otra persona lo puede reclamar a usted como dependiente en su declaración de impuestos de 2013. 1040x online Si cumple todas estas condiciones, tal vez pueda tomar un crédito de hasta el 72. 1040x online 5% de la cantidad que usted pagó directamente a un plan de salud calificado para usted y todo miembro de familia que reunió los requisitos. 1040x online No puede tomar el crédito en el caso de primas de seguro sobre cobertura si en realidad fueron pagadas mediante una National Emergency Grant (Subvención para Emergencias Nacionales). 1040x online La cantidad pagada por cobertura de seguro médico calificada tiene que reducirse por toda distribución de una cuenta Archer MSA de ahorros médicos u otra cuenta de ahorros para gastos médicos que se haya utilizado para pagar por dicha cobertura. 1040x online Puede tomar este crédito y anotarlo en la declaración de impuestos o solicitar que se pague por adelantado en nombre suyo a su compañía de seguros. 1040x online Si se paga el crédito por adelantado en nombre suyo, aquella cantidad disminuye la cantidad del crédito que se pueda declarar en la declaración de impuestos. 1040x online Beneficiarios de la TAA. 1040x online   Se considera que tiene derecho a la TAA el primer día del mes si, cualquier día de dicho mes o del anterior, usted: Recibió una asignación por reajuste comercial o Hubiera tenido derecho a recibir una asignación de esta índole salvo que no había agotado todos los derechos al seguro por desempleo (con excepción de toda compensación adicional que se pague con fondos estatales y no se reembolse con fondos federales) que le correspondiera recibir (o correspondería recibir si los solicitara). 1040x online Ejemplo. 1040x online   Recibió una asignación por ajuste comercial para el mes de enero de 2013. 1040x online Tenía derecho a recibir la TAA el primer día de enero y febrero. 1040x online Beneficiarios de la alternativa TAA. 1040x online   Se considera que es un recipiente de la alternativa TAA el primer día del mes si, cualquier día de dicho mes o del anterior, usted recibió beneficios conforme a un programa de asistencia alternativa de ajuste comercial para empleados mayores de edad establecido por el Departamento de Trabajo. 1040x online Ejemplo. 1040x online   Recibió beneficios conforme a un programa de asistencia alternativa de ajuste comercial para empleados mayores de edad para el mes de octubre de 2013. 1040x online El Departamento de Trabajo estableció el programa. 1040x online Tenía derecho como beneficiario a recibir la alternativa TAA el primer día de octubre y noviembre. 1040x online Beneficiarios de la RTAA. 1040x online   Se considera que tiene derecho a la RTAA el primer día del mes si, cualquier día de dicho mes o del anterior, usted recibió beneficios conforme a un programa de asistencia de ajuste comercial relacionados con el reempleo para empleados mayores establecido por el Departamento de Trabajo. 1040x online Beneficiarios de una pensión de la PBGC. 1040x online   Se considera que tiene derecho como beneficiario a una pensión de la PBGC el primer día del mes si se dan las dos condiciones siguientes: Tenía 55 años de edad o más el primer día del mes. 1040x online Recibió beneficios para dicho mes pagados por la PBGC conforme al Título IV de la Employee Retirement Income Security Act of 1974 (Ley de Seguridad de los Ingresos de Jubilación del Empleado de 1974 o ERISA, por sus siglas en inglés). 1040x online Si recibió un pago de suma global de la PGBC después del 5 de agosto de 2002, cumple el requisito (2) anterior para todo mes en el que habría recibido un beneficio de la PBGC si no hubiese recibido el pago de suma global. 1040x online Cómo reclamar el crédito. 1040x online   Para tomar el crédito, tiene que completar el Formulario 8885 y adjuntarlo al Formulario 1040. 1040x online Incluya el crédito en el total de la línea 71 del Formulario 1040 y marque el recuadro c. 1040x online   Tiene que adjuntar cuentas de seguro de salud (o cupones de pago de COBRA) y pruebas de pago correspondientes a toda cantidad que se incluya en la línea 2 del Formulario 8885. 1040x online Para información adicional, vea la Publicación 502 o el Formulario 8885, ambos en inglés. 1040x online Más información. 1040x online   Si desea ver las definiciones y los requisitos especiales, incluyendo los que se refieren a planes de seguro médico que reúnan los requisitos, familiares que podrían darle derecho al crédito (familiares calificados), el efecto de determinados sucesos importantes en la vida y planes de seguro médico provistos por el empleador, vea la Publicación 502 y las instrucciones del Formulario 8885, ambas en inglés. 1040x online Crédito por Retención en Exceso del Impuesto del Seguro Social o del Impuesto de la Jubilación Ferroviaria La mayoría de los empleadores tienen que retener el impuesto del Seguro Social de los salarios de sus empleados. 1040x online Si trabaja para un empleador ferroviario, dicho empleador tiene que retener el impuesto de jubilación ferroviaria (RRTA, por sus siglas en inglés) de nivel 1 y de nivel 2. 1040x online Si trabajó para dos o más empleadores en 2013, es posible que hayan retenido de su salario demasiado impuesto del Seguro Social. 1040x online Si uno o mas de esos empleadores era un empleador ferroviario, también es posible que se le haya retenido demasiado impuesto de jubilación ferroviaria de nivel 1 a la tasa de 6. 1040x online 2%. 1040x online Puede declarar el impuesto del Seguro Social o impuesto de jubilación ferroviaria de nivel 1 en exceso, aplicándolo como crédito a favor de los impuestos sobre los ingresos cuando presente su declaración. 1040x online Para el impuesto RRTA de nivel 1, utilice únicamente la porción de impuesto de RRTA de nivel 1 que fue gravado a la tasa impositiva de 6. 1040x online 2% al calcular si el exceso de impuesto de RRTA de nivel 1 fue retenido, no incluya ninguna porción del impuesto de RRTA de nivel 1 que fue retenido a la tasa impositiva de Medicare (1. 1040x online 45%) o al a tasa impositiva del Impuesto Adicional del Medicare (0. 1040x online 9%). 1040x online En la siguiente tabla aparecen la cantidad máxima de salario sujeto a impuestos y la cantidad máxima de impuestos que debió haberse retenido para 2013. 1040x online Tipo de impuesto Salario  máximo  sujeto a  impuestos Impuesto máximo que debió haberse retenido Seguro Social o  RRTA de nivel 1 $113,700 $7,049. 1040x online 40 RRTA de nivel 2 $84,300 $3,709. 1040x online 20 Todo salario está sujeto a la retención de impuestos al Medicare. 1040x online   Utilice el Formulario 843, Claim for Refund and Request for Abatement (Solicitud de reembolso y reducción de impuestos), en inglés, para solicitar un reembolso del impuesto en exceso de la jubilación ferroviaria de nivel 2. 1040x online Cerciórese de adjuntar una copia de todos los Formularios W-2 que tenga. 1040x online Use la hoja de trabajo 3-3 de la Publicación 505, Tax Withholding and Estimated Tax (Retención de impuestos e impuesto estimado), en inglés, para poder calcular la cantidad en exceso. 1040x online Error del empleador. 1040x online   Si cualquier empleador le retuvo demasiados impuestos del Seguro Social o de la jubilación ferroviaria de nivel 1, no puede reclamar el exceso y aplicarlo como un crédito a favor de los impuestos sobre el ingreso. 1040x online El empleador debe ajustarle los impuestos. 1040x online Si el empleador no ajusta la recaudación en exceso, puede solicitar un reembolso utilizando el Formulario 843. 1040x online Declaración conjunta. 1040x online   Si presenta una declaración conjunta, no puede añadir a la cantidad retenida de su salario los impuestos del Seguro Social ni los de la jubilación ferroviaria de nivel 1 retenidos del salario de su cónyuge. 1040x online Calcule por separado la retención que le corresponda a usted y la que corresponda a su cónyuge para determinar si se le han retenido impuestos en exceso a cualquiera de los dos. 1040x online Cómo calcular el crédito si no trabajó para una empresa ferroviaria. 1040x online   Si no trabajó para una empresa ferroviaria en 2013, calcule el crédito de la siguiente forma: 1. 1040x online Sume todos los impuestos del Seguro Social retenidos (pero no más de $7,049. 1040x online 40 por cada empleador). 1040x online Anote el total aquí   2. 1040x online Anote todo impuesto no retenido del Seguro Social sobre propinas o seguro de vida colectivo a término que aparezca en el total de la línea 60 del Formulario 1040, identificado como “UT”   3. 1040x online Sume las líneas 1 y 2. 1040x online Si el total es $7,049. 1040x online 40 o menos, no siga. 1040x online No puede reclamar el crédito   4. 1040x online Límite sobre los impuestos del Seguro Social 7,049. 1040x online 40 5. 1040x online Crédito. 1040x online De la línea 3, reste la línea 4. 1040x online Anote el resultado aquí y en la línea 69 del Formulario 1040 (o la línea 41 del Formulario 1040A) $ Ejemplo. 1040x online Está casado y presenta una declaración conjunta con su cónyuge quien no recibió ingresos brutos en 2013. 1040x online Durante 2013, usted trabajó para la empresa Brown Technology Company y ganó un salario de $60,000. 1040x online Le retuvieron impuestos del Seguro Social de $3,720. 1040x online También trabajó para otro empleador en 2013 y ganó un salario de $55,000. 1040x online De dicho salario, le retuvieron $3,410 de impuestos del Seguro Social. 1040x online Como trabajó para más de un empleador y el total de su salario superó los $113,700, puede tomar un crédito de $80. 1040x online 60 por los impuestos del Seguro Social retenidos en exceso. 1040x online 1. 1040x online Sume todo impuesto del Seguro Social retenido (pero no más de $7,049. 1040x online 40 por cada empleador). 1040x online Anote el total aquí $7,130. 1040x online 00 2. 1040x online Anote todo impuesto no retenido del Seguro Social sobre propinas o seguro de vida colectivo a término que aparezca en el total de la línea 60 del Formulario 1040, identificado como “UT” −0− 3. 1040x online Sume las líneas 1 y 2. 1040x online Si el total es $7,049. 1040x online 40 o menos, no siga. 1040x online No puede reclamar el crédito 7,130. 1040x online 00 4. 1040x online Límite sobre los impuestos del Seguro Social 7,049. 1040x online 40 5. 1040x online Crédito. 1040x online De la línea 3, reste la línea 4. 1040x online Anote el resultado aquí y en la línea 69 del Formulario 1040 (o la línea 41 del Formulario 1040A) $80. 1040x online 60 Cómo calcular el crédito si trabajó para una empresa ferroviaria. 1040x online   Si fue empleado ferroviario en algún momento durante 2013, calcule el crédito de la siguiente forma: 1. 1040x online Sume todos los impuestos del Seguro Social y de la jubilación ferroviaria de nivel 1 retenidos a la tasa de 6. 1040x online 2% (pero no más de $7,049. 1040x online 40 por cada empleador). 1040x online Anote el total aquí   2. 1040x online Anote todos los impuestos no retenidos del Seguro Social y de la jubilación ferroviaria de nivel 1 sobre propinas o seguro de vida colectivo que aparezca en el total de la línea 60 del Formulario 1040, identificado como “UT”   3. 1040x online Sume las líneas 1 y 2. 1040x online Si el total es $7,049. 1040x online 40 o menos, no siga. 1040x online No puede reclamar el crédito   4. 1040x online Límite sobre los impuestos del Seguro Social y de la jubilación ferroviaria de nivel 1 7,049. 1040x online 40 5. 1040x online Crédito. 1040x online De la línea 3, reste la línea 4. 1040x online Anote el resultado aquí y en la línea 69 del Formulario 1040 (o la línea 41 del Formulario 1040A) $ Cómo reclamar el crédito. 1040x online   Anote el crédito en la línea 69 del Formulario 1040 o inclúyalo en el total de la línea 41 del Formulario 1040A. 1040x online Más información. 1040x online   Para información adicional sobre el crédito, vea la Publicación 505, en inglés. 1040x online Prev  Up  Next   Home   More Online Publications
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The 1040x Online

1040x online Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. 1040x online General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. 1040x online Several assets. 1040x online Special situations. 1040x online Schedule D (Form 1040). 1040x online Form 4797. 1040x online How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 1040x online The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. 1040x online The installment sales method cannot be used for the following. 1040x online Sale of inventory. 1040x online   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. 1040x online See Sale of a Business under Other Rules, later. 1040x online Dealer sales. 1040x online   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. 1040x online This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. 1040x online However, the rule does not apply to an installment sale of property used or produced in farming. 1040x online Special rule. 1040x online   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. 1040x online For more information, see section 453(l). 1040x online Stock or securities. 1040x online   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. 1040x online You must report the entire gain on the sale in the year in which the trade date falls. 1040x online Installment obligation. 1040x online   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. 1040x online General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. 1040x online See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. 1040x online Sale at a loss. 1040x online   If your sale results in a loss, you cannot use the installment method. 1040x online If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. 1040x online Unstated interest. 1040x online   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. 1040x online See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. 1040x online Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. 1040x online Each payment on an installment sale usually consists of the following three parts. 1040x online Interest income. 1040x online Return of your adjusted basis in the property. 1040x online Gain on the sale. 1040x online In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. 1040x online You do not include in income the part that is the return of your basis in the property. 1040x online Basis is the amount of your investment in the property for installment sale purposes. 1040x online Interest Income You must report interest as ordinary income. 1040x online Interest is generally not included in a down payment. 1040x online However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. 1040x online Interest provided in the agreement is called stated interest. 1040x online If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. 1040x online See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. 1040x online Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. 1040x online A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). 1040x online Figuring adjusted basis for installment sale purposes. 1040x online   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. 1040x online When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. 1040x online Worksheet A. 1040x online Figuring Adjusted Basis and Gross Profit Percentage 1. 1040x online Enter the selling price for the property   2. 1040x online Enter your adjusted basis for the property     3. 1040x online Enter your selling expenses     4. 1040x online Enter any depreciation recapture     5. 1040x online Add lines 2, 3, and 4. 1040x online  This is your adjusted basis for installment sale purposes   6. 1040x online Subtract line 5 from line 1. 1040x online If zero or less, enter -0-. 1040x online  This is your gross profit     If the amount entered on line 6 is zero, stop here. 1040x online You cannot use the installment method. 1040x online   7. 1040x online Enter the contract price for the property   8. 1040x online Divide line 6 by line 7. 1040x online This is your gross profit percentage   Selling price. 1040x online   The selling price is the total cost of the property to the buyer and includes any of the following. 1040x online Any money you are to receive. 1040x online The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). 1040x online Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). 1040x online Any of your selling expenses the buyer pays. 1040x online   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. 1040x online Adjusted basis for installment sale purposes. 1040x online   Your adjusted basis is the total of the following three items. 1040x online Adjusted basis. 1040x online Selling expenses. 1040x online Depreciation recapture. 1040x online Adjusted basis. 1040x online   Basis is your investment in the property for installment sale purposes. 1040x online The way you figure basis depends on how you acquire the property. 1040x online The basis of property you buy is generally its cost. 1040x online The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. 1040x online   While you own property, various events may change your original basis. 1040x online Some events, such as adding rooms or making permanent improvements, increase basis. 1040x online Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. 1040x online The result is adjusted basis. 1040x online   For more information on how to figure basis and adjusted basis, see Publication 551. 1040x online For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. 1040x online Selling expenses. 1040x online   Selling expenses relate to the sale of the property. 1040x online They include commissions, attorney fees, and any other expenses paid on the sale. 1040x online Selling expenses are added to the basis of the sold property. 1040x online Depreciation recapture. 1040x online   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. 1040x online See Depreciation Recapture Income under Other Rules, later. 1040x online Gross profit. 1040x online   Gross profit is the total gain you report on the installment method. 1040x online   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. 1040x online If the property you sold was your home, subtract from the gross profit any gain you can exclude. 1040x online See Sale of Your Home , later, under Reporting Installment Sale Income. 1040x online Contract price. 1040x online   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. 1040x online Gross profit percentage. 1040x online   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. 1040x online This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. 1040x online   The gross profit percentage generally remains the same for each payment you receive. 1040x online However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. 1040x online Example. 1040x online You sell property at a contract price of $6,000 and your gross profit is $1,500. 1040x online Your gross profit percentage is 25% ($1,500 ÷ $6,000). 1040x online After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. 1040x online The remainder (balance) of each payment is the tax-free return of your adjusted basis. 1040x online Amount to report as installment sale income. 1040x online   Multiply the payments you receive each year (less interest) by the gross profit percentage. 1040x online The result is your installment sale income for the tax year. 1040x online In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. 1040x online A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. 1040x online For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. 1040x online Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. 1040x online You then must refigure the gross profit percentage for the remaining payments. 1040x online Refigure your gross profit using Worksheet B. 1040x online You will spread any remaining gain over future installments. 1040x online Worksheet B. 1040x online New Gross Profit Percentage — Selling Price Reduced 1. 1040x online Enter the reduced selling  price for the property   2. 1040x online Enter your adjusted  basis for the  property     3. 1040x online Enter your selling  expenses     4. 1040x online Enter any depreciation  recapture     5. 1040x online Add lines 2, 3, and 4. 1040x online   6. 1040x online Subtract line 5 from line 1. 1040x online  This is your adjusted  gross profit   7. 1040x online Enter any installment sale  income reported in  prior year(s)   8. 1040x online Subtract line 7 from line 6   9. 1040x online Future installments   10. 1040x online Divide line 8 by line 9. 1040x online  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 1040x online Example. 1040x online In 2011, you sold land with a basis of $40,000 for $100,000. 1040x online Your gross profit was $60,000. 1040x online You received a $20,000 down payment and the buyer's note for $80,000. 1040x online The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. 1040x online Your gross profit percentage is 60%. 1040x online You reported a gain of $12,000 on each payment received in 2011 and 2012. 1040x online In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. 1040x online The new gross profit percentage, 46. 1040x online 67%, is figured on Example—Worksheet B. 1040x online You will report a gain of $7,000 (46. 1040x online 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. 1040x online Example — Worksheet B. 1040x online New Gross Profit Percentage — Selling Price Reduced 1. 1040x online Enter the reduced selling  price for the property 85,000 2. 1040x online Enter your adjusted  basis for the  property 40,000   3. 1040x online Enter your selling  expenses -0-   4. 1040x online Enter any depreciation  recapture -0-   5. 1040x online Add lines 2, 3, and 4. 1040x online 40,000 6. 1040x online Subtract line 5 from line 1. 1040x online  This is your adjusted  gross profit 45,000 7. 1040x online Enter any installment sale  income reported in  prior year(s) 24,000 8. 1040x online Subtract line 7 from line 6 21,000 9. 1040x online Future installments 45,000 10. 1040x online Divide line 8 by line 9. 1040x online  This is your new gross profit percentage* 46. 1040x online 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 1040x online Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. 1040x online You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. 1040x online See Schedule D (Form 1040) and Form 4797 , later. 1040x online If the property was your main home, you may be able to exclude part or all of the gain. 1040x online See Sale of Your Home , later. 1040x online Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. 1040x online Attach it to your tax return for each year. 1040x online Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. 1040x online Which parts to complete. 1040x online   Which part to complete depends on whether you are filing the form for the year of sale or a later year. 1040x online Year of sale. 1040x online   Complete lines 1 through 4, Part I, and Part II. 1040x online If you sold property to a related party during the year, also complete Part III. 1040x online Later years. 1040x online   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. 1040x online   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. 1040x online (After December 31, 1986, the installment method is not available for the sale of marketable securities. 1040x online ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. 1040x online Complete Part III unless you received the final payment during the tax year. 1040x online   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. 1040x online Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. 1040x online Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. 1040x online Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). 1040x online If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. 1040x online Your gain is long-term if you owned the property for more than 1 year when you sold it. 1040x online Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. 1040x online All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. 1040x online For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. 1040x online If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. 1040x online ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. 1040x online See Publication 523 for information about excluding the gain. 1040x online If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. 1040x online Seller-financed mortgage. 1040x online   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. 1040x online   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. 1040x online   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. 1040x online   If either person fails to include the other person's SSN, a $50 penalty will be assessed. 1040x online Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. 1040x online The following topics are discussed. 1040x online Electing out of the installment method. 1040x online Payments received or considered received. 1040x online Escrow account. 1040x online Depreciation recapture income. 1040x online Sale to a related person. 1040x online Like-kind exchange. 1040x online Contingent payment sale. 1040x online Single sale of several assets. 1040x online Sale of a business. 1040x online Unstated interest and original issue discount. 1040x online Disposition of an installment obligation. 1040x online Repossession. 1040x online Interest on deferred tax. 1040x online Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. 1040x online To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. 1040x online Notes, mortgages, and land contracts are examples of obligations that are included at FMV. 1040x online You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. 1040x online If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). 1040x online Example. 1040x online You sold a parcel of land for $50,000. 1040x online You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. 1040x online The buyer gave you a note for $40,000. 1040x online The note had an FMV of $40,000. 1040x online You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. 1040x online The land cost $25,000, and you owned it for more than one year. 1040x online You decide to elect out of the installment method and report the entire gain in the year of sale. 1040x online Gain realized:     Selling price $50,000 Minus: Property's adj. 1040x online basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. 1040x online basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. 1040x online You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. 1040x online The interest on the note is ordinary income and is reported as interest income each year. 1040x online How to elect out. 1040x online   To make this election, do not report your sale on Form 6252. 1040x online Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. 1040x online When to elect out. 1040x online   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. 1040x online Automatic six-month extension. 1040x online   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). 1040x online Write “Filed pursuant to section 301. 1040x online 9100-2” at the top of the amended return and file it where the original return was filed. 1040x online Revoking the election. 1040x online   Once made, the election can be revoked only with IRS approval. 1040x online A revocation is retroactive. 1040x online You will not be allowed to revoke the election if either of the following applies. 1040x online One of the purposes is to avoid federal income tax. 1040x online The tax year in which any payment was received has closed. 1040x online Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. 1040x online In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. 1040x online These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. 1040x online However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. 1040x online Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. 1040x online Include these expenses in the selling and contract prices when figuring the gross profit percentage. 1040x online Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. 1040x online Mortgage not more than basis. 1040x online   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. 1040x online It is considered a recovery of your basis. 1040x online The contract price is the selling price minus the mortgage. 1040x online Example. 1040x online You sell property with an adjusted basis of $19,000. 1040x online You have selling expenses of $1,000. 1040x online The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). 1040x online The selling price is $25,000 ($15,000 + $10,000). 1040x online Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). 1040x online The contract price is $10,000 ($25,000 − $15,000 mortgage). 1040x online Your gross profit percentage is 50% ($5,000 ÷ $10,000). 1040x online You report half of each $2,000 payment received as gain from the sale. 1040x online You also report all interest you receive as ordinary income. 1040x online Mortgage more than basis. 1040x online   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. 1040x online The part of the mortgage greater than your basis is treated as a payment received in the year of sale. 1040x online   To figure the contract price, subtract the mortgage from the selling price. 1040x online This is the total amount (other than interest) you will receive directly from the buyer. 1040x online Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). 1040x online The contract price is then the same as your gross profit from the sale. 1040x online    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. 1040x online Example. 1040x online The selling price for your property is $9,000. 1040x online The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. 1040x online Your adjusted basis in the property is $4,400. 1040x online You have selling expenses of $600, for a total installment sale basis of $5,000. 1040x online The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). 1040x online This amount is included in the contract price and treated as a payment received in the year of sale. 1040x online The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. 1040x online Report 100% of each payment (less interest) as gain from the sale. 1040x online Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. 1040x online Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. 1040x online You are considered to receive a payment equal to the outstanding canceled debt. 1040x online Example. 1040x online Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. 1040x online On April 4, 2013, she bought the land for $70,000. 1040x online At that time, $30,000 of her loan to you was outstanding. 1040x online She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. 1040x online She did not assume an existing mortgage. 1040x online She canceled the $30,000 debt you owed her. 1040x online You are considered to have received a $30,000 payment at the time of the sale. 1040x online Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. 1040x online If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. 1040x online Compare the debt to your installment sale basis in the property being sold. 1040x online If the debt is less than your installment sale basis, none of it is treated as a payment. 1040x online If it is more, only the difference is treated as a payment. 1040x online If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. 1040x online These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . 1040x online However, they apply only to the following types of debt the buyer assumes. 1040x online Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. 1040x online Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. 1040x online If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. 1040x online The value of the assumed debt is then considered a payment to you in the year of sale. 1040x online Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. 1040x online However, see Like-Kind Exchange , later. 1040x online Generally, the amount of the payment is the property's FMV on the date you receive it. 1040x online Exception. 1040x online   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. 1040x online See Unstated Interest and Original Issue Discount (OID) , later. 1040x online Debt not payable on demand. 1040x online   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. 1040x online This is true even if the debt is guaranteed by a third party, including a government agency. 1040x online Fair market value (FMV). 1040x online   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. 1040x online Third-party note. 1040x online   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. 1040x online Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. 1040x online The excess of the note's face value over its FMV is interest. 1040x online Exclude this interest in determining the selling price of the property. 1040x online However, see Exception under Property Used As a Payment, earlier. 1040x online Example. 1040x online You sold real estate in an installment sale. 1040x online As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. 1040x online The FMV of the third-party note at the time of the sale was $30,000. 1040x online This amount, not $50,000, is a payment to you in the year of sale. 1040x online The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. 1040x online The remaining 40% is interest taxed as ordinary income. 1040x online Bond. 1040x online   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. 1040x online For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. 1040x online    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. 1040x online However, see Exception under Property Used As a Payment, earlier. 1040x online Buyer's note. 1040x online   The buyer's note (unless payable on demand) is not considered payment on the sale. 1040x online However, its full face value is included when figuring the selling price and the contract price. 1040x online Payments you receive on the note are used to figure your gain in the year received. 1040x online Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. 1040x online This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. 1040x online It does not apply to the following dispositions. 1040x online Sales of property used or produced in farming. 1040x online Sales of personal-use property. 1040x online Qualifying sales of time-shares and residential lots. 1040x online The net debt proceeds are the gross debt minus the direct expenses of getting the debt. 1040x online The amount treated as a payment is considered received on the later of the following dates. 1040x online The date the debt becomes secured. 1040x online The date you receive the debt proceeds. 1040x online A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. 1040x online For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. 1040x online Limit. 1040x online   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. 1040x online The total contract price on the installment sale. 1040x online Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. 1040x online Installment payments. 1040x online   The pledge rule accelerates the reporting of the installment obligation payments. 1040x online Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. 1040x online Exception. 1040x online   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. 1040x online The debt was outstanding on December 17, 1987. 1040x online The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. 1040x online   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. 1040x online   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. 1040x online Any excess is treated as a payment on the installment obligation. 1040x online Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. 1040x online These sales cannot be reported on the installment method. 1040x online The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. 1040x online When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. 1040x online Example. 1040x online You sell property for $100,000. 1040x online The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. 1040x online You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. 1040x online You report the entire gain in the year of sale. 1040x online Escrow established in a later year. 1040x online   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. 1040x online Substantial restriction. 1040x online   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. 1040x online For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. 1040x online Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. 1040x online Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. 1040x online Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. 1040x online The recapture income is also included in Part I of Form 6252. 1040x online However, the gain equal to the recapture income is reported in full in the year of the sale. 1040x online Only the gain greater than the recapture income is reported on the installment method. 1040x online For more information on depreciation recapture, see chapter 3 in Publication 544. 1040x online The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. 1040x online Determining gross profit is discussed under General Rules , earlier. 1040x online Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. 1040x online If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. 1040x online These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. 1040x online Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. 1040x online Instead, all payments to be received are considered received in the year of sale. 1040x online However, see Exception , below. 1040x online Depreciable property for this rule is any property the purchaser can depreciate. 1040x online Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. 1040x online In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. 1040x online The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. 1040x online Exception. 1040x online   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. 1040x online You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. 1040x online Related person. 1040x online   Related persons include the following. 1040x online A person and all controlled entities with respect to that person. 1040x online A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. 1040x online Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. 1040x online Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. 1040x online   For information about which entities are controlled entities, see section 1239(c). 1040x online Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. 1040x online The related person makes the second disposition before making all payments on the first disposition. 1040x online The related person disposes of the property within 2 years of the first disposition. 1040x online This rule does not apply if the property involved is marketable securities. 1040x online Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. 1040x online See Exception , later. 1040x online Related person. 1040x online   Related persons include the following. 1040x online Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. 1040x online A partnership or estate and a partner or beneficiary. 1040x online A trust (other than a section 401(a) employees trust) and a beneficiary. 1040x online A trust and an owner of the trust. 1040x online Two corporations that are members of the same controlled group as defined in section 267(f). 1040x online The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 1040x online A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. 1040x online An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. 1040x online A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. 1040x online The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 1040x online Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040x online An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040x online A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. 1040x online An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. 1040x online Example 1. 1040x online In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. 1040x online His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. 1040x online His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). 1040x online He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. 1040x online 50). 1040x online Bob made no improvements to the property and sold it to Alfalfa Inc. 1040x online , in 2013 for $600,000 after making the payment for that year. 1040x online The amount realized from the second disposition is $600,000. 1040x online Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . 1040x online 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). 1040x online Example 2. 1040x online Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. 1040x online The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . 1040x online 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. 1040x online They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. 1040x online In 2016, he receives the final $100,000 payment. 1040x online He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . 1040x online 50 Installment sale income for 2016 $ 50,000 Exception. 1040x online   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. 1040x online Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. 1040x online   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. 1040x online However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. 1040x online   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. 1040x online An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. 1040x online A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. 1040x online Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. 1040x online These trades are known as like-kind exchanges. 1040x online The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. 1040x online You do not have to report any part of your gain if you receive only like-kind property. 1040x online However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. 1040x online For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. 1040x online Installment payments. 1040x online   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. 1040x online The contract price is reduced by the FMV of the like-kind property received in the trade. 1040x online The gross profit is reduced by any gain on the trade that can be postponed. 1040x online Like-kind property received in the trade is not considered payment on the installment obligation. 1040x online Example. 1040x online In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. 1040x online He also receives an installment note for $800,000 in the trade. 1040x online Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. 1040x online George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). 1040x online His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). 1040x online The contract price is $800,000 ($1,000,000 − $200,000). 1040x online The gross profit percentage is 75% ($600,000 ÷ $800,000). 1040x online He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. 1040x online He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). 1040x online Deferred exchanges. 1040x online   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. 1040x online Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. 1040x online If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. 1040x online See Regulations section 1. 1040x online 1031(k)-1(j)(2) for these rules. 1040x online Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. 1040x online This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. 1040x online If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. 1040x online For rules on using the installment method for a contingent payment sale, see Regulations section 15a. 1040x online 453-1(c). 1040x online Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. 1040x online You also have to allocate part of the selling price to each asset. 1040x online If you sell assets that constitute a trade or business, see Sale of a Business , later. 1040x online Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. 1040x online If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. 1040x online This becomes the net FMV. 1040x online A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. 1040x online However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. 1040x online It must be reported separately. 1040x online The remaining assets sold at a gain are reported together. 1040x online Example. 1040x online You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. 1040x online The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. 1040x online Your installment sale basis for each parcel was $15,000. 1040x online Your net gain was $85,000 ($130,000 − $45,000). 1040x online You report the gain on the installment method. 1040x online The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. 1040x online The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. 1040x online The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. 1040x online You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. 1040x online Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. 1040x online You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. 1040x online The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. 1040x online You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. 1040x online However, if parcel C was held for personal use, the loss is not deductible. 1040x online You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). 1040x online Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. 1040x online Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. 1040x online Assets sold at a loss. 1040x online Real and personal property eligible for the installment method. 1040x online Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. 1040x online Inventory. 1040x online   The sale of inventories of personal property cannot be reported on the installment method. 1040x online All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. 1040x online   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. 1040x online If you do not, each payment must be allocated between the inventory and the other assets sold. 1040x online   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. 1040x online Use your basis in the inventory to figure the cost of goods sold. 1040x online Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. 1040x online Residual method. 1040x online   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. 1040x online This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. 1040x online   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. 1040x online This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b). 1040x online   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. 1040x online   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). 1040x online The consideration remaining after this reduction must be allocated among the various business assets in a certain order. 1040x online   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. 1040x online Certificates of deposit, U. 1040x online S. 1040x online Government securities, foreign currency, and actively traded personal property, including stock and securities. 1040x online Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. 1040x online However, see Regulations section 1. 1040x online 338-6(b)(2)(iii) for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. 1040x online Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. 1040x online All other assets except section 197 intangibles. 1040x online Section 197 intangibles except goodwill and going concern value. 1040x online Goodwill and going concern value (whether or not they qualify as section 197 intangibles). 1040x online   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. 1040x online For example, if an asset is described in both (4) and (6), include it in (4). 1040x online Agreement. 1040x online   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. 1040x online This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. 1040x online Reporting requirement. 1040x online   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. 1040x online Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 1040x online The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 1040x online Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. 1040x online The sale of a partnership interest is treated as the sale of a single capital asset. 1040x online The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. 1040x online (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. 1040x online ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. 1040x online The gain allocated to the other assets can be reported under the installment method. 1040x online For more information on the treatment of unrealized receivables and inventory, see Publication 541. 1040x online Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. 1040x online You received a $100,000 down payment and the buyer's note for $120,000. 1040x online The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. 1040x online The total selling price is $220,000. 1040x online Your selling expenses are $11,000. 1040x online The selling expenses are divided among all the assets sold, including inventory. 1040x online Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). 1040x online The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. 1040x online Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). 1040x online The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. 1040x online The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. 1040x online   Sale  Price Sale   Exp. 1040x online Adj. 1040x online   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. 1040x online A 71,000 3,550 63,800 3,650 Mch. 1040x online B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. 1040x online There is no depreciation recapture income because the building was depreciated using the straight line method. 1040x online All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. 1040x online Figure depreciation recapture in Part III of Form 4797. 1040x online The total depreciation recapture income reported in Part II of Form 4797 is $5,209. 1040x online This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). 1040x online These gains are reported in full in the year of sale and are not included in the installment sale computation. 1040x online Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. 1040x online The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. 1040x online The selling price equals the contract price for the installment sale ($108,500). 1040x online The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. 1040x online   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). 1040x online The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. 1040x online 95 Building— $9,600 ÷ $108,500 8. 1040x online 85 Goodwill— $17,575 ÷ $108,500 16. 1040x online 20 Total 48. 1040x online 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. 1040x online The selling price for the installment sale is $108,500. 1040x online This is 49. 1040x online 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). 1040x online The selling price of assets not reported on the installment method is $111,500. 1040x online This is 50. 1040x online 7% ($111,500 ÷ $220,000) of the total selling price. 1040x online Multiply principal payments by 49. 1040x online 3% to determine the part of the payment for the installment sale. 1040x online The balance, 50. 1040x online 7%, is for the part reported in the year of the sale. 1040x online The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. 1040x online When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. 1040x online Only the part for the installment sale (49. 1040x online 3%) is used in the installment sale computation. 1040x online The only payment received in 2013 is the down payment of $100,000. 1040x online The part of the payment for the installment sale is $49,300 ($100,000 × 49. 1040x online 3%). 1040x online This amount is used in the installment sale computation. 1040x online Installment income for 2013. 1040x online   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. 1040x online Income Land—22. 1040x online 95% of $49,300 $11,314 Building—8. 1040x online 85% of $49,300 4,363 Goodwill—16. 1040x online 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. 1040x online   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. 1040x online 3% of the total payments you receive on the buyer's note during the year. 1040x online Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. 1040x online Interest provided in the contract is called stated interest. 1040x online If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. 1040x online If section 483 applies to the contract, this interest is called unstated interest. 1040x online If section 1274 applies to the contract, this interest is called original issue discount (OID). 1040x online An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). 1040x online Treatment of unstated interest and OID. 1040x online   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. 1040x online As a result, the buyer cannot deduct the unstated interest. 1040x online The seller must report the unstated interest as income. 1040x online   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. 1040x online   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. 1040x online Rules for the seller. 1040x online   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. 1040x online If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. 1040x online   Include the unstated interest in income based on your regular method of accounting. 1040x online Include OID in income over the term of the contract. 1040x online   The OID includible in income each year is based on the constant yield method described in section 1272. 1040x online (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. 1040x online )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. 1040x online Reduce the selling price by any stated principal treated as interest to determine the gain. 1040x online   Report unstated interest or OID on your tax return, in addition to stated interest. 1040x online Rules for the buyer. 1040x online   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. 1040x online These rules do not apply to personal-use property (for example, property not used in a trade or business). 1040x online Adequate stated interest. 1040x online   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. 1040x online The present value of a payment is determined based on the test rate of interest, defined next. 1040x online (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. 1040x online ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. 1040x online Test rate of interest. 1040x online   The test rate of interest for a contract is the 3-month rate. 1040x online The 3-month rate is the lower of the following applicable federal rates (AFRs). 1040x online The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed. 1040x online The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs. 1040x online Applicable federal rate (AFR). 1040x online   The AFR depends on the month the binding