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2009 Tax Return Forms

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2009 Tax Return Forms

2009 tax return forms 14. 2009 tax return forms   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. 2009 tax return forms  If you are a U. 2009 tax return forms S. 2009 tax return forms citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. 2009 tax return forms S. 2009 tax return forms law. 2009 tax return forms This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. 2009 tax return forms Introduction This chapter discusses the tax consequences of selling or trading investment property. 2009 tax return forms It explains the following. 2009 tax return forms What a sale or trade is. 2009 tax return forms Figuring gain or loss. 2009 tax return forms Nontaxable trades. 2009 tax return forms Related party transactions. 2009 tax return forms Capital gains or losses. 2009 tax return forms Capital assets and noncapital assets. 2009 tax return forms Holding period. 2009 tax return forms Rollover of gain from publicly traded securities. 2009 tax return forms Other property transactions. 2009 tax return forms   Certain transfers of property are not discussed here. 2009 tax return forms They are discussed in other IRS publications. 2009 tax return forms These include the following. 2009 tax return forms Sales of a main home, covered in chapter 15. 2009 tax return forms Installment sales, covered in Publication 537, Installment Sales. 2009 tax return forms Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. 2009 tax return forms Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. 2009 tax return forms    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. 2009 tax return forms Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. 2009 tax return forms It also discusses investment-related expenses. 2009 tax return forms Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. 2009 tax return forms Generally, you should receive the statement by February 15 of the next year. 2009 tax return forms It will show the gross proceeds from the sale. 2009 tax return forms If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. 2009 tax return forms Generally, a covered security is a security you acquired after 2010, with certain exceptions. 2009 tax return forms See the Instructions for Form 8949. 2009 tax return forms The IRS will also get a copy of Form 1099-B from the broker. 2009 tax return forms Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. 2009 tax return forms What Is a Sale or Trade? This section explains what is a sale or trade. 2009 tax return forms It also explains certain transactions and events that are treated as sales or trades. 2009 tax return forms A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. 2009 tax return forms A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. 2009 tax return forms Sale and purchase. 2009 tax return forms   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. 2009 tax return forms The sale and purchase are two separate transactions. 2009 tax return forms But see Like-kind exchanges under Nontaxable Trades, later. 2009 tax return forms Redemption of stock. 2009 tax return forms   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. 2009 tax return forms Dividend versus sale or trade. 2009 tax return forms   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. 2009 tax return forms Both direct and indirect ownership of stock will be considered. 2009 tax return forms The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. 2009 tax return forms Redemption or retirement of bonds. 2009 tax return forms   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. 2009 tax return forms   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. 2009 tax return forms For details, see Regulations section 1. 2009 tax return forms 1001-3. 2009 tax return forms Surrender of stock. 2009 tax return forms   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. 2009 tax return forms The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. 2009 tax return forms Worthless securities. 2009 tax return forms    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. 2009 tax return forms This affects whether your capital loss is long term or short term. 2009 tax return forms See Holding Period , later. 2009 tax return forms   Worthless securities also include securities that you abandon after March 12, 2008. 2009 tax return forms To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. 2009 tax return forms All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. 2009 tax return forms    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. 2009 tax return forms Do not deduct them in the year the stock became worthless. 2009 tax return forms How to report loss. 2009 tax return forms    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. 2009 tax return forms In column (a), enter “Worthless. 2009 tax return forms ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. 2009 tax return forms See Form 8949 and the Instructions for Form 8949. 2009 tax return forms For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2009 tax return forms See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2009 tax return forms Filing a claim for refund. 2009 tax return forms   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. 2009 tax return forms You must use Form 1040X, Amended U. 2009 tax return forms S. 2009 tax return forms Individual Income Tax Return, to amend your return for the year the security became worthless. 2009 tax return forms You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2009 tax return forms For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2009 tax return forms How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. 2009 tax return forms Gain. 2009 tax return forms   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. 2009 tax return forms Loss. 2009 tax return forms   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. 2009 tax return forms Adjusted basis. 2009 tax return forms   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. 2009 tax return forms See chapter 13 for more information about determining the adjusted basis of property. 2009 tax return forms Amount realized. 2009 tax return forms   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). 2009 tax return forms Amount realized includes the money you receive plus the fair market value of any property or services you receive. 2009 tax return forms If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. 2009 tax return forms If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. 2009 tax return forms For more information, see Publication 537. 2009 tax return forms Fair market value. 2009 tax return forms   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. 2009 tax return forms Example. 2009 tax return forms You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. 2009 tax return forms Your gain is $3,000 ($10,000 − $7,000). 2009 tax return forms Debt paid off. 2009 tax return forms    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. 2009 tax return forms This is true even if neither you nor the buyer is personally liable for the debt. 2009 tax return forms For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. 2009 tax return forms Example. 2009 tax return forms You sell stock that you had pledged as security for a bank loan of $8,000. 2009 tax return forms Your basis in the stock is $6,000. 2009 tax return forms The buyer pays off your bank loan and pays you $20,000 in cash. 2009 tax return forms The amount realized is $28,000 ($20,000 + $8,000). 2009 tax return forms Your gain is $22,000 ($28,000 − $6,000). 2009 tax return forms Payment of cash. 2009 tax return forms   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. 2009 tax return forms Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. 2009 tax return forms If the result is a positive number, it is a gain. 2009 tax return forms If the result is a negative number, it is a loss. 2009 tax return forms No gain or loss. 2009 tax return forms   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. 2009 tax return forms In this case, you may have neither a gain nor a loss. 2009 tax return forms See Basis Other Than Cost in chapter 13. 2009 tax return forms Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. 2009 tax return forms For more information on nontaxable trades, see chapter 1 of Publication 544. 2009 tax return forms Like-kind exchanges. 2009 tax return forms   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. 2009 tax return forms To be nontaxable, a trade must meet all six of the following conditions. 2009 tax return forms The property must be business or investment property. 2009 tax return forms You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. 2009 tax return forms Neither property may be property used for personal purposes, such as your home or family car. 2009 tax return forms The property must not be held primarily for sale. 2009 tax return forms The property you trade and the property you receive must not be property you sell to customers, such as merchandise. 2009 tax return forms The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. 2009 tax return forms However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. 2009 tax return forms Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. 2009 tax return forms There must be a trade of like property. 2009 tax return forms The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. 2009 tax return forms The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. 2009 tax return forms The trade of a piece of machinery for a store building is not a trade of like property. 2009 tax return forms Real property located in the United States and real property located outside the United States are not like property. 2009 tax return forms Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. 2009 tax return forms The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. 2009 tax return forms The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. 2009 tax return forms    If you trade property with a related party in a like-kind exchange, a special rule may apply. 2009 tax return forms See Related Party Transactions , later in this chapter. 2009 tax return forms Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. 2009 tax return forms Partly nontaxable exchange. 2009 tax return forms   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. 2009 tax return forms You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. 2009 tax return forms You cannot deduct a loss. 2009 tax return forms Like property and unlike property transferred. 2009 tax return forms   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. 2009 tax return forms The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. 2009 tax return forms Like property and money transferred. 2009 tax return forms   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. 2009 tax return forms Basis of property received. 2009 tax return forms   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. 2009 tax return forms How to report. 2009 tax return forms   You must report the trade of like property on Form 8824. 2009 tax return forms If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. 2009 tax return forms See the instructions for Line 22 in the Instructions for Form 8824. 2009 tax return forms   For information on using Form 4797, see chapter 4 of Publication 544. 2009 tax return forms Corporate stocks. 2009 tax return forms   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. 2009 tax return forms Corporate reorganizations. 2009 tax return forms   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. 2009 tax return forms If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. 2009 tax return forms Stock for stock of the same corporation. 2009 tax return forms   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. 2009 tax return forms This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. 2009 tax return forms Convertible stocks and bonds. 2009 tax return forms   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. 2009 tax return forms Property for stock of a controlled corporation. 2009 tax return forms   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. 2009 tax return forms This rule applies both to individuals and to groups who transfer property to a corporation. 2009 tax return forms It does not apply if the corporation is an investment company. 2009 tax return forms   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. 2009 tax return forms   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. 2009 tax return forms For details, see Regulations section 1. 2009 tax return forms 351-3. 2009 tax return forms Additional information. 2009 tax return forms   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. 2009 tax return forms Insurance policies and annuities. 2009 tax return forms   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. 2009 tax return forms   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. 2009 tax return forms For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. 2009 tax return forms Revenue Ruling 2003-76 is available at www. 2009 tax return forms irs. 2009 tax return forms gov/irb/2003-33_IRB/ar11. 2009 tax return forms html. 2009 tax return forms Revenue Procedure 2008-24 is available at www. 2009 tax return forms irs. 2009 tax return forms gov/irb/2008-13_IRB/ar13. 2009 tax return forms html. 2009 tax return forms For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. 2009 tax return forms Revenue Procedure 2011-38 is available at www. 2009 tax return forms irs. 2009 tax return forms gov/irb/2011-30_IRB/ar09. 2009 tax return forms html. 2009 tax return forms   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. 2009 tax return forms A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. 2009 tax return forms The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. 2009 tax return forms   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. 2009 tax return forms Demutualization of life insurance companies. 2009 tax return forms   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. 2009 tax return forms See Demutualization of Life Insurance Companies in Publication 550. 2009 tax return forms U. 2009 tax return forms S. 2009 tax return forms Treasury notes or bonds. 2009 tax return forms   You can trade certain issues of U. 2009 tax return forms S. 2009 tax return forms Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. 2009 tax return forms See Savings bonds traded in chapter 1 of Publication 550 for more information. 2009 tax return forms Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. 2009 tax return forms This nonrecognition rule does not apply in the following situations. 2009 tax return forms The recipient spouse or former spouse is a nonresident alien. 2009 tax return forms Property is transferred in trust and liability exceeds basis. 2009 tax return forms Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. 2009 tax return forms For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. 2009 tax return forms Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. 2009 tax return forms The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. 2009 tax return forms This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. 2009 tax return forms This rule applies for purposes of determining loss as well as gain. 2009 tax return forms Any gain recognized on a transfer in trust increases the basis. 2009 tax return forms A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. 2009 tax return forms Related Party Transactions Special rules apply to the sale or trade of property between related parties. 2009 tax return forms Gain on sale or trade of depreciable property. 2009 tax return forms   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. 2009 tax return forms See chapter 3 of Publication 544 for more information. 2009 tax return forms Like-kind exchanges. 2009 tax return forms   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. 2009 tax return forms See Like-kind exchanges , earlier, under Nontaxable Trades. 2009 tax return forms   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. 2009 tax return forms However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. 2009 tax return forms See Related Party Transactions in chapter 4 of Publication 550 for exceptions. 2009 tax return forms Losses on sales or trades of property. 2009 tax return forms   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. 2009 tax return forms Members of your family. 2009 tax return forms This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2009 tax return forms ), and lineal descendants (children, grandchildren, etc. 2009 tax return forms ). 2009 tax return forms A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2009 tax return forms A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2009 tax return forms (See Constructive ownership of stock , later. 2009 tax return forms ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2009 tax return forms   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. 2009 tax return forms A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. 2009 tax return forms Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 2009 tax return forms A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. 2009 tax return forms 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 interest, or the profits interest, in the partnership. 2009 tax return forms Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 2009 tax return forms Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2009 tax return forms An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). 2009 tax return forms Two corporations that are members of the same controlled group. 2009 tax return forms (Under certain conditions, however, these losses are not disallowed but must be deferred. 2009 tax return forms ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. 2009 tax return forms Multiple property sales or trades. 2009 tax return forms   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. 2009 tax return forms The gain on each item may be taxable. 2009 tax return forms However, you cannot deduct the loss on any item. 2009 tax return forms Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. 2009 tax return forms Indirect transactions. 2009 tax return forms   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. 2009 tax return forms This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. 2009 tax return forms Constructive ownership of stock. 2009 tax return forms   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. 2009 tax return forms Rule 1. 2009 tax return forms   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2009 tax return forms Rule 2. 2009 tax return forms   An individual is considered to own the stock directly or indirectly owned by or for his or her family. 2009 tax return forms Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. 2009 tax return forms Rule 3. 2009 tax return forms   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2009 tax return forms Rule 4. 2009 tax return forms   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. 2009 tax return forms But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. 2009 tax return forms Property received from a related party. 2009 tax return forms    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. 2009 tax return forms This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. 2009 tax return forms This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. 2009 tax return forms   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. 2009 tax return forms Example 1. 2009 tax return forms Your brother sells you stock for $7,600. 2009 tax return forms His cost basis is $10,000. 2009 tax return forms Your brother cannot deduct the loss of $2,400. 2009 tax return forms Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. 2009 tax return forms Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). 2009 tax return forms Example 2. 2009 tax return forms If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). 2009 tax return forms You cannot deduct the loss that was not allowed to your brother. 2009 tax return forms Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. 2009 tax return forms Character of gain or loss. 2009 tax return forms   You need to classify your gains and losses as either ordinary or capital gains or losses. 2009 tax return forms You then need to classify your capital gains and losses as either short term or long term. 2009 tax return forms If you have long-term gains and losses, you must identify your 28% rate gains and losses. 2009 tax return forms If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. 2009 tax return forms   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. 2009 tax return forms Reporting capital gains and losses is explained in chapter 16. 2009 tax return forms Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. 2009 tax return forms Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. 2009 tax return forms A sale or trade of a noncapital asset generally results in ordinary gain or loss. 2009 tax return forms Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. 2009 tax return forms In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. 2009 tax return forms Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. 2009 tax return forms Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. 2009 tax return forms Any property you own is a capital asset, except the following noncapital assets. 2009 tax return forms Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. 2009 tax return forms For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. 2009 tax return forms Depreciable property used in your trade or business, even if fully depreciated. 2009 tax return forms Real property used in your trade or business. 2009 tax return forms A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2009 tax return forms For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. 2009 tax return forms Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). 2009 tax return forms U. 2009 tax return forms S. 2009 tax return forms Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. 2009 tax return forms Certain commodities derivative financial instruments held by commodities derivatives dealers. 2009 tax return forms Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. 2009 tax return forms Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 2009 tax return forms Investment Property Investment property is a capital asset. 2009 tax return forms Any gain or loss from its sale or trade is generally a capital gain or loss. 2009 tax return forms Gold, silver, stamps, coins, gems, etc. 2009 tax return forms   These are capital assets except when they are held for sale by a dealer. 2009 tax return forms Any gain or loss you have from their sale or trade generally is a capital gain or loss. 2009 tax return forms Stocks, stock rights, and bonds. 2009 tax return forms   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. 2009 tax return forms However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. 2009 tax return forms Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. 2009 tax return forms However, you cannot deduct a loss from selling personal use property. 2009 tax return forms Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2009 tax return forms You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. 2009 tax return forms You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. 2009 tax return forms You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. 2009 tax return forms For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2009 tax return forms See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2009 tax return forms You can revoke the election if you have IRS approval. 2009 tax return forms To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. 2009 tax return forms See, for example, Rev. 2009 tax return forms Proc. 2009 tax return forms 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. 2009 tax return forms Proc. 2009 tax return forms 2013–32, available at www. 2009 tax return forms irs. 2009 tax return forms gov/irb/2013-01_IRB/ar06. 2009 tax return forms html. 2009 tax return forms Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. 2009 tax return forms Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. 2009 tax return forms Short-term government obligations. 2009 tax return forms   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. 2009 tax return forms This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. 2009 tax return forms Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. 2009 tax return forms   However, do not treat these gains as income to the extent you previously included the discount in income. 2009 tax return forms See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2009 tax return forms Short-term nongovernment obligations. 2009 tax return forms   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). 2009 tax return forms This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. 2009 tax return forms   However, to the extent you previously included the discount in income, you do not have to include it in income again. 2009 tax return forms See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2009 tax return forms Tax-exempt state and local government bonds. 2009 tax return forms   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. 2009 tax return forms To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. 2009 tax return forms   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. 2009 tax return forms For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. 2009 tax return forms   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. 2009 tax return forms If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. 2009 tax return forms If you bought the bonds after April 30, 1993, the gain is ordinary income. 2009 tax return forms   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. 2009 tax return forms For more information, see Market Discount Bonds in chapter 1 of Publication 550. 2009 tax return forms    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. 2009 tax return forms Redeemed before maturity. 2009 tax return forms   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. 2009 tax return forms   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. 2009 tax return forms However, you must report the unearned part of OID as a capital gain. 2009 tax return forms Example. 2009 tax return forms On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. 2009 tax return forms The face amount of the bond was $1,000. 2009 tax return forms The $200 discount was OID. 2009 tax return forms At the time the bond was issued, the issuer had no intention of redeeming it before it matured. 2009 tax return forms The bond was callable at its face amount beginning 10 years after the issue date. 2009 tax return forms The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. 2009 tax return forms The OID earned during the time you held the bond, $73, is not taxable. 2009 tax return forms The $60 accrued annual interest also is not taxable. 2009 tax return forms However, you must report the unearned part of OID ($127) as a capital gain. 2009 tax return forms Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). 2009 tax return forms   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. 2009 tax return forms The rest of the gain is capital gain. 2009 tax return forms If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. 2009 tax return forms This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. 2009 tax return forms Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). 2009 tax return forms   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. 2009 tax return forms Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. 2009 tax return forms See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. 2009 tax return forms   If you sell or trade the debt instrument before maturity, your gain is a capital gain. 2009 tax return forms However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. 2009 tax return forms In this case, the rest of the gain is capital gain. 2009 tax return forms Market discount bonds. 2009 tax return forms   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. 2009 tax return forms If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. 2009 tax return forms The rest of the gain is capital gain. 2009 tax return forms See Market Discount Bonds in chapter 1 of Publication 550. 2009 tax return forms   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. 2009 tax return forms See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. 2009 tax return forms Retirement of debt instrument. 2009 tax return forms   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. 2009 tax return forms Notes of individuals. 2009 tax return forms   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. 2009 tax return forms An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. 2009 tax return forms The lender is not in the business of lending money. 2009 tax return forms The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. 2009 tax return forms Avoiding federal tax is not one of the principal purposes of the loan. 2009 tax return forms   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. 2009 tax return forms When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. 2009 tax return forms The rest of the gain, if any, is capital gain. 2009 tax return forms Any loss on the sale or redemption is capital loss. 2009 tax return forms Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. 2009 tax return forms Ordinary loss. 2009 tax return forms Casualty loss. 2009 tax return forms Nonbusiness bad debt (short-term capital loss). 2009 tax return forms  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. 2009 tax return forms Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. 2009 tax return forms Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. 2009 tax return forms Report the loss on Form 4797, line 10. 2009 tax return forms Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. 2009 tax return forms Report the gain on Form 8949. 2009 tax return forms See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. 2009 tax return forms For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2009 tax return forms See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2009 tax return forms Holding Period If you sold or traded investment property, you must determine your holding period for the property. 2009 tax return forms Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. 2009 tax return forms Long-term or short-term. 2009 tax return forms   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. 2009 tax return forms If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. 2009 tax return forms   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. 2009 tax return forms The day you disposed of the property is part of your holding period. 2009 tax return forms Example. 2009 tax return forms If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. 2009 tax return forms If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. 2009 tax return forms Securities traded on established market. 2009 tax return forms   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. 2009 tax return forms    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. 2009 tax return forms Example. 2009 tax return forms You are a cash method, calendar year taxpayer. 2009 tax return forms You sold stock at a gain on December 30, 2013. 2009 tax return forms According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. 2009 tax return forms You received payment of the sales price on that same day. 2009 tax return forms Report your gain on your 2013 return, even though you received the payment in 2014. 2009 tax return forms The gain is long term or short term depending on whether you held the stock more than 1 year. 2009 tax return forms Your holding period ended on December 30. 2009 tax return forms If you had sold the stock at a loss, you would also report it on your 2013 return. 2009 tax return forms U. 2009 tax return forms S. 2009 tax return forms Treasury notes and bonds. 2009 tax return forms   The holding period of U. 2009 tax return forms S. 2009 tax return forms Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. 2009 tax return forms The holding period of U. 2009 tax return forms S. 2009 tax return forms Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. 2009 tax return forms Automatic investment service. 2009 tax return forms   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. 2009 tax return forms Your holding period starts on the day after the bank's purchase date. 2009 tax return forms If a share was bought over more than one purchase date, your holding period for that share is a split holding period. 2009 tax return forms A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. 2009 tax return forms Nontaxable trades. 2009 tax return forms   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. 2009 tax return forms Property received as a gift. 2009 tax return forms   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. 2009 tax return forms   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. 2009 tax return forms Inherited property. 2009 tax return forms   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. 2009 tax return forms This is true regardless of how long you actually held the property. 2009 tax return forms However, if you inherited property from someone who died in 2010, see the information below. 2009 tax return forms Inherited property from someone who died in 2010. 2009 tax return forms   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. 2009 tax return forms Real property bought. 2009 tax return forms   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. 2009 tax return forms However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. 2009 tax return forms The holding period cannot start until there is an actual contract of sale. 2009 tax return forms The holding period of the seller cannot end before that time. 2009 tax return forms Real property repossessed. 2009 tax return forms   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. 2009 tax return forms Your holding period does not include the time between the original sale and the repossession. 2009 tax return forms That is, it does not include the period during which the first buyer held the property. 2009 tax return forms Stock dividends. 2009 tax return forms   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. 2009 tax return forms   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. 2009 tax return forms This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. 2009 tax return forms Nontaxable stock rights. 2009 tax return forms   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. 2009 tax return forms The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. 2009 tax return forms Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. 2009 tax return forms You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. 2009 tax return forms Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. 2009 tax return forms To be deductible, nonbusiness bad debts must be totally worthless. 2009 tax return forms You cannot deduct a partly worthless nonbusiness debt. 2009 tax return forms Genuine debt required. 2009 tax return forms   A debt must be genuine for you to deduct a loss. 2009 tax return forms A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. 2009 tax return forms Basis in bad debt required. 2009 tax return forms    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. 2009 tax return forms For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. 2009 tax return forms If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. 2009 tax return forms When deductible. 2009 tax return forms   You can take a bad debt deduction only in the year the debt becomes worthless. 2009 tax return forms You do not have to wait until a debt is due to determine whether it is worthless. 2009 tax return forms A debt becomes worthless when there is no longer any chance that the amount owed will be paid. 2009 tax return forms   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. 2009 tax return forms You must only show that you have taken reasonable steps to collect the debt. 2009 tax return forms Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. 2009 tax return forms How to report bad debts. 2009 tax return forms    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. 2009 tax return forms    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. 2009 tax return forms    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2009 tax return forms See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2009 tax return forms   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. 2009 tax return forms For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. 2009 tax return forms Filing a claim for refund. 2009 tax return forms    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. 2009 tax return forms To do this, use Form 1040X to amend your return for the year the debt became worthless. 2009 tax return forms You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2009 tax return forms For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2009 tax return forms Additional information. 2009 tax return forms   For more information, see Nonbusiness Bad Debts in Publication 550. 2009 tax return forms For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. 2009 tax return forms Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. 2009 tax return forms A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. 2009 tax return forms If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). 2009 tax return forms The result is your basis in the new stock or securities. 2009 tax return forms This adjustment postpones the loss deduction until the disposition of the new stock or securities. 2009 tax return forms Your holding period for the new stock or securities includes the holding period of the stock or securities sold. 2009 tax return forms For more information, see Wash Sales, in chapter 4 of Publication 550. 2009 tax return forms Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. 2009 tax return forms This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. 2009 tax return forms You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. 2009 tax return forms This postpones your gain until the year you dispose of the replacement property. 2009 tax return forms You qualify to make this choice if you meet all the following tests. 2009 tax return forms You sell publicly traded securities at a gain. 2009 tax return forms Publicly traded securities are securities traded on an established securities market. 2009 tax return forms Your gain from the sale is a capital gain. 2009 tax return forms During the 60-day period beginning on the date of the sale, you buy replacement property. 2009 tax return forms This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). 2009 tax return forms This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. 2009 tax return forms Amount of gain recognized. 2009 tax return forms   If you make the choice described in this section, you must recognize gain only up to the following amount. 2009 tax return forms The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). 2009 tax return forms  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. 2009 tax return forms If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. 2009 tax return forms Limit on gain postponed. 2009 tax return forms   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. 2009 tax return forms Basis of replacement property. 2009 tax return forms   You must subtract the amount of postponed gain from the basis of your replacement property. 2009 tax return forms How to report and postpone gain. 2009 tax return forms    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 2009 tax return forms Prev  Up  Next   Home   More Online Publications
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IRS Reminds Taxpayers about Direct Deposit and Split Refunds

 

IR-2014-37, March 27, 2014

WASHINGTON — For 57 million Americans, the refund check is no longer in the mail; it’s already in the bank.

So far this year, the Internal Revenue Service has issued direct-deposit refunds valued at more than $170 billion, as a growing number of taxpayers are choosing the speed and convenience of direct deposit, rather than receiving a paper check. So far this year, almost 85 percent of all refunds have been directly deposited into taxpayers’ bank accounts.

Taxpayers can have their refunds directly deposited when they e-file or by including their account information on their paper tax return..

Banks, mutual funds, brokerage firms and credit unions are all eligible to receive direct deposits. Before making this choice, however, taxpayers should make sure the financial institution accepts direct deposits for the type of account chosen.

Taxpayers also have the option and flexibility of splitting refund deposits among two or three different accounts or financial institutions. For instance, a refund could be split between a savings account, a checking account or an Individual Retirement Arrangement (IRA). Taxpayers can split their refunds when they e-file or by filing Form 8888, Direct Deposit of Refund to More Than One Account.

A taxpayer's refund should only be deposited directly into accounts that are in the taxpayer's own name; the taxpayer's spouse's name or both if it's a joint account.

Those who choose direct deposit get their refunds at least a week sooner, and direct deposit eliminates the chance of a lost, stolen or undeliverable refund.

[The filing season statistics table follows.]

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2014 FILING SEASON STATISTICS

Cumulative statistics comparing 3/22/13 and 3/21/14

Individual Income Tax Returns:

2013

2014

% Change

Total Receipts

82,413,000

82,852,000

0.5

Total Processed

77,102,000

81,149,000

5.2

 

 

 

 

E-filing Receipts:

 

 

 

TOTAL           

74,420,000

75,610,000

1.6

Tax Professionals

44,524,000

43,953,000

-1.3

Self-prepared

29,896,000

31,657,000

5.9

 

 

 

 

Web Usage:

 

 

 

Visits to IRS.gov

234,237,695

209,074,699

-10.7

 

 

 

 

Total Refunds:

 

 

 

Number

66,429,000

67,383,000

1.4

Amount

$187.788

Billion

$193.543

Billion

3.1

Average refund

$2,827

$2,872

1.6

 

 

 

 

Direct Deposit Refunds:

 

 

 

Number

56,985,000

57,101,000

0.2

Amount

$170.127

Billion

$170.187

Billion

0.04

Average refund

$2,985

$2,980

-0.2

 

Page Last Reviewed or Updated: 27-Mar-2014

The 2009 Tax Return Forms

2009 tax return forms 4. 2009 tax return forms   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. 2009 tax return forms Higher income taxpayers. 2009 tax return forms Minimum required for higher income taxpayers. 2009 tax return forms Estate or trust payments of estimated tax. 2009 tax return forms Lowering or eliminating the penalty. 2009 tax return forms ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. 2009 tax return forms Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. 2009 tax return forms You may understand this chapter better if you can refer to a copy of your latest federal income tax return. 2009 tax return forms No penalty. 2009 tax return forms   Generally, you will not have to pay a penalty for 2013 if any of the following apply. 2009 tax return forms The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. 2009 tax return forms (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. 2009 tax return forms ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. 2009 tax return forms Your total tax for 2013 (defined later) minus your withholding is less than $1,000. 2009 tax return forms You did not have a tax liability for 2012. 2009 tax return forms You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. 2009 tax return forms IRS can figure the penalty for you. 2009 tax return forms   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. 2009 tax return forms Generally, the IRS will figure the penalty for you and send you a bill. 2009 tax return forms   You only need to figure your penalty in the following three situations. 2009 tax return forms You are requesting a waiver of part, but not all, of the penalty. 2009 tax return forms You are using the annualized income installment method to figure the penalty. 2009 tax return forms You are treating the federal income tax withheld from your income as paid on the dates actually withheld. 2009 tax return forms However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. 2009 tax return forms See Form 2210 , later. 2009 tax return forms Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. 2009 tax return forms Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. 2009 tax return forms General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. 2009 tax return forms (Your 2012 tax return must cover a 12-month period. 2009 tax return forms ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. 2009 tax return forms Special rules for certain individuals. 2009 tax return forms   There are special rules for farmers and fishermen and certain higher income taxpayers. 2009 tax return forms Farmers and fishermen. 2009 tax return forms   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. 2009 tax return forms   See Farmers and Fishermen , later. 2009 tax return forms Higher income taxpayers. 2009 tax return forms   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . 2009 tax return forms This rule does not apply to farmers or fishermen. 2009 tax return forms   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. 2009 tax return forms Penalty figured separately for each period. 2009 tax return forms   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. 2009 tax return forms This is true even if you are due a refund when you file your income tax return. 2009 tax return forms Example. 2009 tax return forms You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. 2009 tax return forms Early in January 2014, you made an estimate of your total 2013 tax. 2009 tax return forms Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. 2009 tax return forms On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. 2009 tax return forms Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. 2009 tax return forms You do not owe a penalty for your payment due January 15, 2014. 2009 tax return forms However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. 2009 tax return forms Minimum required each period. 2009 tax return forms   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. 2009 tax return forms 5% of your 2013 tax, or 25% of your 2012 tax. 2009 tax return forms (Your 2012 tax return must cover a 12-month period. 2009 tax return forms ) Minimum required for higher income taxpayers. 2009 tax return forms   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. 2009 tax return forms 5% for 25% in (2) under General Rule . 2009 tax return forms When penalty is charged. 2009 tax return forms   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. 2009 tax return forms If a payment is mailed, the date of the U. 2009 tax return forms S. 2009 tax return forms postmark is considered the date of payment. 2009 tax return forms   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. 2009 tax return forms ) is considered to be the date of payment. 2009 tax return forms Estate or trust payments of estimated tax. 2009 tax return forms   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. 2009 tax return forms Amended returns. 2009 tax return forms    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. 2009 tax return forms If you file an amended return after the due date of the original return, use the tax shown on the original return. 2009 tax return forms   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. 2009 tax return forms This rule applies only if both original separate returns were filed on time. 2009 tax return forms 2012 separate returns and 2013 joint return. 2009 tax return forms    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. 2009 tax return forms You filed a separate return if you filed as single, head of household, or married filing separately. 2009 tax return forms 2012 joint return and 2013 separate returns. 2009 tax return forms    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. 2009 tax return forms You are filing a separate return if you file as single, head of household, or married filing separately. 2009 tax return forms   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. 2009 tax return forms Then multiply the tax on the joint return by the following fraction. 2009 tax return forms   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. 2009 tax return forms Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. 2009 tax return forms Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. 2009 tax return forms For 2013, they file married filing separately. 2009 tax return forms Lisa figures her share of the tax on the 2012 joint return as follows. 2009 tax return forms 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. 2009 tax return forms 67% Lisa's part of tax on joint return ($6,484 × 88. 2009 tax return forms 67%) $ 5,749 Form 2210. 2009 tax return forms   In most cases, you do not need to file Form 2210. 2009 tax return forms The IRS will figure the penalty for you and send you a bill. 2009 tax return forms If you want us to figure the penalty for you, leave the penalty line on your return blank. 2009 tax return forms Do not file Form 2210. 2009 tax return forms   To determine if you should file Form 2210, see Part II of Form 2210. 2009 tax return forms If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. 2009 tax return forms If you use Form 2210, you cannot file Form 1040EZ. 2009 tax return forms   On Form 1040, enter the amount of your penalty on line 77. 2009 tax return forms If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. 2009 tax return forms If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. 2009 tax return forms   On Form 1040A, enter the amount of your penalty on line 46. 2009 tax return forms If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. 2009 tax return forms If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. 2009 tax return forms Lowering or eliminating the penalty. 2009 tax return forms    You may be able to lower or eliminate your penalty if you file Form 2210. 2009 tax return forms You must file Form 2210 with your return if any of the following applies. 2009 tax return forms You request a waiver. 2009 tax return forms See Waiver of Penalty , later. 2009 tax return forms You use the annualized income installment method. 2009 tax return forms See the explanation of this method under Annualized Income Installment Method (Schedule AI) . 2009 tax return forms You use your actual withholding for each payment period for estimated tax purposes. 2009 tax return forms See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). 2009 tax return forms You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. 2009 tax return forms Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. 2009 tax return forms Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. 2009 tax return forms Total tax for 2013. 2009 tax return forms   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. 2009 tax return forms    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). 2009 tax return forms Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. 2009 tax return forms The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. 2009 tax return forms Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. 2009 tax return forms   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. 2009 tax return forms   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. 2009 tax return forms Note. 2009 tax return forms When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. 2009 tax return forms Paid through withholding. 2009 tax return forms    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. 2009 tax return forms Add to that any write-in amount on line 72 identified as “Form 8689. 2009 tax return forms ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. 2009 tax return forms On Form 1040EZ, it is the amount on line 7. 2009 tax return forms No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. 2009 tax return forms S. 2009 tax return forms citizen or resident for the whole year. 2009 tax return forms For this rule to apply, your tax year must have included all 12 months of the year. 2009 tax return forms You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. 2009 tax return forms Example. 2009 tax return forms Ray, who is single and 22 years old, was unemployed for a few months during 2012. 2009 tax return forms He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. 2009 tax return forms He had no other income. 2009 tax return forms Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). 2009 tax return forms He filed a return only to have his withheld income tax refunded to him. 2009 tax return forms In 2013, Ray began regular work as an independent contractor. 2009 tax return forms Ray made no estimated tax payments in 2013. 2009 tax return forms Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. 2009 tax return forms Total tax for 2012. 2009 tax return forms   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. 2009 tax return forms    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). 2009 tax return forms Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. 2009 tax return forms The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. 2009 tax return forms Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. 2009 tax return forms   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. 2009 tax return forms   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. 2009 tax return forms Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. 2009 tax return forms If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. 2009 tax return forms Example. 2009 tax return forms The tax on Lori Lane's 2012 return was $12,400. 2009 tax return forms Her AGI was not more than $150,000 for either 2012 or 2013. 2009 tax return forms The tax on her 2013 return (Form 1040, line 55) is $13,044. 2009 tax return forms Line 56 (self-employment tax) is $8,902. 2009 tax return forms Her 2013 total tax is $21,946. 2009 tax return forms For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). 2009 tax return forms 90% of her 2013 tax is $19,751. 2009 tax return forms Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. 2009 tax return forms The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. 2009 tax return forms Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. 2009 tax return forms Different 2012 filing status. 2009 tax return forms    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. 2009 tax return forms Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. 2009 tax return forms If you qualify to use this method, it will result in the same penalty amount as the regular method. 2009 tax return forms However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. 2009 tax return forms You can use the short method only if you meet one of the following requirements. 2009 tax return forms You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). 2009 tax return forms You paid the same amount of estimated tax on each of the four payment due dates. 2009 tax return forms If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. 2009 tax return forms Note. 2009 tax return forms If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. 2009 tax return forms However, if the payment was only a few days early, the difference is likely to be small. 2009 tax return forms You cannot use the short method if any of the following apply. 2009 tax return forms You made any estimated tax payments late. 2009 tax return forms You checked box C or D in Part II of Form 2210. 2009 tax return forms You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. 2009 tax return forms S. 2009 tax return forms income tax withholding. 2009 tax return forms If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. 2009 tax return forms Also, you cannot use your actual withholding during each period to figure your payments for each period. 2009 tax return forms These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). 2009 tax return forms Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. 2009 tax return forms Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. 2009 tax return forms You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. 2009 tax return forms You paid one or more estimated tax payments on a date after the due date. 2009 tax return forms You paid at least one, but less than four, installments of estimated tax. 2009 tax return forms You paid estimated tax payments in un- equal amounts. 2009 tax return forms You use the annualized income installment method to figure your underpayment for each payment period. 2009 tax return forms You use your actual withholding during each payment period to figure your payments. 2009 tax return forms Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. 2009 tax return forms Enter the results on line 27 of Section B. 2009 tax return forms Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. 2009 tax return forms Complete lines 20 through 26 of the first column before going to line 20 of the next column. 2009 tax return forms Required installments—line 18. 2009 tax return forms   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). 2009 tax return forms This method—the regular method—is the one to use if you received your income evenly throughout the year. 2009 tax return forms   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. 2009 tax return forms First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. 2009 tax return forms See Annualized Income Installment Method (Schedule AI), later. 2009 tax return forms Payments made—line 19. 2009 tax return forms   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. 2009 tax return forms For special rules for figuring your payments, see Form 2210 instructions for line 19. 2009 tax return forms   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. 2009 tax return forms If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. 2009 tax return forms Actual withholding method. 2009 tax return forms    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. 2009 tax return forms You can make this choice separately for the tax withheld from your wages and for all other withholding. 2009 tax return forms This includes any excess social security and tier 1 RRTA tax withheld. 2009 tax return forms   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. 2009 tax return forms   If you use your actual withholding, you must check box D in Form 2210, Part II. 2009 tax return forms Then complete Form 2210 using the regular method (Part IV) and file it with your return. 2009 tax return forms Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. 2009 tax return forms The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. 2009 tax return forms For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. 2009 tax return forms A 3% rate applies to all four periods. 2009 tax return forms Payments. 2009 tax return forms    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. 2009 tax return forms For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. 2009 tax return forms You can use the table in the Form 2210 instructions to make your list. 2009 tax return forms Follow those instructions for listing income tax withheld and payments made with your return. 2009 tax return forms Use the list to determine when each underpayment was paid. 2009 tax return forms   If you mail your estimated tax payments, use the date of the U. 2009 tax return forms S. 2009 tax return forms postmark as the date of payment. 2009 tax return forms Line 1b. 2009 tax return forms   Apply the payments listed to underpayment balance in the first column until it is fully paid. 2009 tax return forms Apply payments in the order made. 2009 tax return forms Figuring the penalty. 2009 tax return forms   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. 2009 tax return forms On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. 2009 tax return forms On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. 2009 tax return forms If no payments are applied, figure the penalty on the amount on line 1a. 2009 tax return forms Aid for counting days. 2009 tax return forms    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. 2009 tax return forms Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. 2009 tax return forms In the same manner, find the number for the date the payment was made. 2009 tax return forms Subtract the due date “number” from the payment date “number. 2009 tax return forms ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. 2009 tax return forms Table 4-1. 2009 tax return forms Calendar To Determine the Number of Days a Payment Is Late Instructions. 2009 tax return forms Use this table with Form 2210 if you are completing Part IV, Section B. 2009 tax return forms First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. 2009 tax return forms Then, in the same manner, find the number for the date the payment was made. 2009 tax return forms Finally, subtract the due date number from the payment date number. 2009 tax return forms The result is the number of days the payment is late. 2009 tax return forms Example. 2009 tax return forms The payment due date is June 15 (61). 2009 tax return forms The payment was made on November 4 (203). 2009 tax return forms The payment is 142 days late (203 – 61). 2009 tax return forms Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. 2009 tax return forms Sept. 2009 tax return forms Oct. 2009 tax return forms Nov. 2009 tax return forms Dec. 2009 tax return forms Jan. 2009 tax return forms Feb. 2009 tax return forms Mar. 2009 tax return forms Apr. 2009 tax return forms 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. 2009 tax return forms Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. 2009 tax return forms To figure your underpayment using this method, complete Form 2210, Schedule AI. 2009 tax return forms Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. 2009 tax return forms If you use the annualized income installment method, you must check box C in Part II of Form 2210. 2009 tax return forms Also, you must attach Form 2210 and Schedule AI to your return. 2009 tax return forms If you use Schedule AI for any payment due date, you must use it for all payment due dates. 2009 tax return forms Completing Schedule AI. 2009 tax return forms   Follow the Form 2210 instructions to complete Schedule AI. 2009 tax return forms For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. 2009 tax return forms If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. 2009 tax return forms Note. 2009 tax return forms Each period includes amounts from the previous period(s). 2009 tax return forms Period (a) includes items for January 1 through March 31. 2009 tax return forms Period (b) includes items for January 1 through May 31. 2009 tax return forms Period (c) includes items for January 1 through August 31. 2009 tax return forms Period (d) includes items for the entire year. 2009 tax return forms Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. 2009 tax return forms The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. 2009 tax return forms If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. 2009 tax return forms Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. 2009 tax return forms The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. 2009 tax return forms Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . 2009 tax return forms See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. 2009 tax return forms Form 2210-F. 2009 tax return forms   Use Form 2210-F to figure any underpayment penalty. 2009 tax return forms Do not attach it to your return unless you check a box in Part I. 2009 tax return forms However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. 2009 tax return forms Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. 2009 tax return forms Keep your filled-in Form 2210-F for your records. 2009 tax return forms    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. 2009 tax return forms Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. 2009 tax return forms You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. 2009 tax return forms You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. 2009 tax return forms You had a reasonable cause for not making the payment. 2009 tax return forms Your underpayment was not due to willful neglect. 2009 tax return forms How to request a waiver. 2009 tax return forms   To request a waiver, see the Instructions for Form 2210. 2009 tax return forms Farmers and fishermen. 2009 tax return forms   To request a waiver, see the Instructions for Form 2210-F. 2009 tax return forms Federally declared disaster. 2009 tax return forms   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. 2009 tax return forms During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. 2009 tax return forms Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. 2009 tax return forms If you still owe a penalty after the automatic waiver is applied, we will send you a bill. 2009 tax return forms   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. 2009 tax return forms Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. 2009 tax return forms If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. 2009 tax return forms   Details on the applicable disaster postponement period can be found at IRS. 2009 tax return forms gov. 2009 tax return forms Enter Tax Relief in Disaster Situations. 2009 tax return forms Select the federally declared disaster that affected you. 2009 tax return forms    Worksheet 4-1. 2009 tax return forms 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. 2009 tax return forms To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. 2009 tax return forms                   1. 2009 tax return forms Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. 2009 tax return forms       2. 2009 tax return forms Enter your annualized qualified dividends for the period 2. 2009 tax return forms           3. 2009 tax return forms Are you filing Schedule D?               □ Yes. 2009 tax return forms Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. 2009 tax return forms If either line 15 or line 16 is blank or a loss, enter -0-. 2009 tax return forms 3. 2009 tax return forms             □ No. 2009 tax return forms Enter your annualized capital gain distributions from Form 1040, line 13             4. 2009 tax return forms Add lines 2 and 3   4. 2009 tax return forms           5. 2009 tax return forms If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. 2009 tax return forms Otherwise, enter -0-   5. 2009 tax return forms           6. 2009 tax return forms Subtract line 5 from line 4. 2009 tax return forms If zero or less, enter -0- 6. 2009 tax return forms       7. 2009 tax return forms Subtract line 6 from line 1. 2009 tax return forms If zero or less, enter -0- 7. 2009 tax return forms       8. 2009 tax return forms Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. 2009 tax return forms 8. 2009 tax return forms       9. 2009 tax return forms Enter the smaller of line 1 or line 8 9. 2009 tax return forms       10. 2009 tax return forms Enter the smaller of line 7 or line 9 10. 2009 tax return forms       11. 2009 tax return forms Subtract line 10 from line 9. 2009 tax return forms This amount is taxed at 0% 11. 2009 tax return forms       12. 2009 tax return forms Enter the smaller of line 1 or line 6 12. 2009 tax return forms       13. 2009 tax return forms Enter the amount from line 11 13. 2009 tax return forms       14. 2009 tax return forms Subtract line 13 from line 12 14. 2009 tax return forms       15. 2009 tax return forms Multiply line 14 by 15% (. 2009 tax return forms 15) 15. 2009 tax return forms   16. 2009 tax return forms Figure the tax on the amount on line 7. 2009 tax return forms If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. 2009 tax return forms If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. 2009 tax return forms   17. 2009 tax return forms Add lines 15 and 16 17. 2009 tax return forms   18. 2009 tax return forms Figure the tax on the amount on line 1. 2009 tax return forms If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. 2009 tax return forms If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. 2009 tax return forms   19. 2009 tax return forms Tax on all taxable income. 2009 tax return forms Enter the smaller of line 17 or line 18. 2009 tax return forms Also enter this amount on line 12 of Schedule AI in the appropriate column. 2009 tax return forms However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. 2009 tax return forms   Worksheet 4-2. 2009 tax return forms 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. 2009 tax return forms             1. 2009 tax return forms Enter the amount from line 11 of Schedule AI for the period 1. 2009 tax return forms   2. 2009 tax return forms Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. 2009 tax return forms   3. 2009 tax return forms Add lines 1 and 2 3. 2009 tax return forms   4. 2009 tax return forms Tax on the amount on line 3. 2009 tax return forms Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. 2009 tax return forms See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. 2009 tax return forms (Note. 2009 tax return forms You do not have to use the same method for each period on Schedule AI. 2009 tax return forms ) 4. 2009 tax return forms   5. 2009 tax return forms Tax on the amount on line 2. 2009 tax return forms If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. 2009 tax return forms If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. 2009 tax return forms   6. 2009 tax return forms Subtract line 5 from line 4. 2009 tax return forms Enter the result here and on line 12 of Schedule AI. 2009 tax return forms If zero or less,  enter -0- 6. 2009 tax return forms             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. 2009 tax return forms     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. 2009 tax return forms If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. 2009 tax return forms Complete the rest of Form 8615 according to its instructions. 2009 tax return forms Then complete lines 5 and 6 above. 2009 tax return forms     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. 2009 tax return forms Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). 2009 tax return forms Next, determine if you have a capital gain excess. 2009 tax return forms     Figuring capital gain excess. 2009 tax return forms To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). 2009 tax return forms If the result is more than zero, that amount is your capital gain excess. 2009 tax return forms     No capital gain excess. 2009 tax return forms If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. 2009 tax return forms Then complete lines 5 and 6 above. 2009 tax return forms     Capital gain excess. 2009 tax return forms If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. 2009 tax return forms Then complete lines 5 and 6 above. 2009 tax return forms     Make the modifications below only for purposes of filling out Worksheet 4-2 above. 2009 tax return forms     a. 2009 tax return forms Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. 2009 tax return forms     b. 2009 tax return forms Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. 2009 tax return forms     c. 2009 tax return forms Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. 2009 tax return forms     d. 2009 tax return forms Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). 2009 tax return forms   Prev  Up  Next   Home   More Online Publications