File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

2010 Income Tax Forms

Student TaxCan You E File 1040xFree Tax PreparationHow Can I File My 2010 TaxesHow Do I Amend My 2012 Tax Return OnlineNeed To File 2012 TaxesTax Software Free1040ez Instructions 2013How To Fill Out Amended Tax FormH&r Block Tax EstimatorFree 1040 Ez2009 Tax AmendmentState Tax Return OnlineFree Turbo Tax FilingFirstgov GovWhere Can I File 2011 TaxesI Need To File My State Taxes OnlyCan I File An Amended Tax Return OnlineH&r Block 2011 Tax Software DownloadHow To Fill Out A 1040ez2011 1040a Tax FormHow To Fill Out The 1040ezH&rblock ComTurbotax 2011 SoftwareH&rblock OnlineHow To Amend Tax Return 2013Irs Gov FreefileFree Tax Filing Online State And FederalFree Efile For State TaxesTax Planning Us State Income TaxesFill Out 1040ezEz Tax ReturnFree Income Tax ReturnTurbo Tax For 2011 Tax YearCan I File My 2011 Taxes OnlineWhere Can I File 2011 Tax ReturnIrs 1040x FormIrs Form 1040x 2011How To Amend Your Taxes2011 Irs Form 1040a

2010 Income Tax Forms

2010 income tax forms Publication 547 - Main Content Table of Contents CasualtyFamily pet. 2010 income tax forms Progressive deterioration. 2010 income tax forms Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. 2010 income tax forms Business or income-producing property. 2010 income tax forms Loss of inventory. 2010 income tax forms Leased property. 2010 income tax forms Exception for personal-use real property. 2010 income tax forms Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. 2010 income tax forms Lessee's loss. 2010 income tax forms Disaster Area LossesDisaster loss to inventory. 2010 income tax forms Main home in disaster area. 2010 income tax forms Unsafe home. 2010 income tax forms Time limit for making choice. 2010 income tax forms Revoking your choice. 2010 income tax forms Figuring the loss deduction. 2010 income tax forms How to report the loss on Form 1040X. 2010 income tax forms Records. 2010 income tax forms Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. 2010 income tax forms Property held more than 1 year. 2010 income tax forms Depreciable property. 2010 income tax forms Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 2010 income tax forms A sudden event is one that is swift, not gradual or progressive. 2010 income tax forms An unexpected event is one that is ordinarily unanticipated and unintended. 2010 income tax forms An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. 2010 income tax forms Generally, casualty losses are deductible during the taxable year that the loss occurred. 2010 income tax forms See Table 3, later. 2010 income tax forms Deductible losses. 2010 income tax forms   Deductible casualty losses can result from a number of different causes, including the following. 2010 income tax forms Car accidents (but see Nondeductible losses , next, for exceptions). 2010 income tax forms Earthquakes. 2010 income tax forms Fires (but see Nondeductible losses , next, for exceptions). 2010 income tax forms Floods. 2010 income tax forms Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. 2010 income tax forms Mine cave-ins. 2010 income tax forms Shipwrecks. 2010 income tax forms Sonic booms. 2010 income tax forms Storms, including hurricanes and tornadoes. 2010 income tax forms Terrorist attacks. 2010 income tax forms Vandalism. 2010 income tax forms Volcanic eruptions. 2010 income tax forms Nondeductible losses. 2010 income tax forms   A casualty loss is not deductible if the damage or destruction is caused by the following. 2010 income tax forms Accidentally breaking articles such as glassware or china under normal conditions. 2010 income tax forms A family pet (explained below). 2010 income tax forms A fire if you willfully set it, or pay someone else to set it. 2010 income tax forms A car accident if your willful negligence or willful act caused it. 2010 income tax forms The same is true if the willful act or willful negligence of someone acting for you caused the accident. 2010 income tax forms Progressive deterioration (explained below). 2010 income tax forms However, see Special Procedure for Damage From Corrosive Drywall , later. 2010 income tax forms Family pet. 2010 income tax forms   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. 2010 income tax forms Example. 2010 income tax forms Your antique oriental rug was damaged by your new puppy before it was housebroken. 2010 income tax forms Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. 2010 income tax forms Progressive deterioration. 2010 income tax forms   Loss of property due to progressive deterioration is not deductible as a casualty loss. 2010 income tax forms This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 2010 income tax forms The following are examples of damage due to progressive deterioration. 2010 income tax forms The steady weakening of a building due to normal wind and weather conditions. 2010 income tax forms The deterioration and damage to a water heater that bursts. 2010 income tax forms However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. 2010 income tax forms Most losses of property caused by droughts. 2010 income tax forms To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. 2010 income tax forms Termite or moth damage. 2010 income tax forms The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. 2010 income tax forms However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. 2010 income tax forms Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. 2010 income tax forms Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. 2010 income tax forms For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. 2010 income tax forms Note. 2010 income tax forms If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. 2010 income tax forms S. 2010 income tax forms Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. 2010 income tax forms Form 4684 for the appropriate year can be found at IRS. 2010 income tax forms gov. 2010 income tax forms Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. 2010 income tax forms Corrosive drywall. 2010 income tax forms   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. 2010 income tax forms The revised identification guidance and remediation guidelines are available at www. 2010 income tax forms cpsc. 2010 income tax forms gov/Safety-Education/Safety-Education-Centers/Drywall. 2010 income tax forms Special instructions for completing Form 4684. 2010 income tax forms   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. 2010 income tax forms The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. 2010 income tax forms Top margin of Form 4684. 2010 income tax forms   Enter “Revenue Procedure 2010-36”. 2010 income tax forms Line 1. 2010 income tax forms   Enter the information required by the line 1 instructions. 2010 income tax forms Line 2. 2010 income tax forms   Skip this line. 2010 income tax forms Line 3. 2010 income tax forms   Enter the amount of insurance or other reimbursements you received (including through litigation). 2010 income tax forms If none, enter -0-. 2010 income tax forms Lines 4–7. 2010 income tax forms   Skip these lines. 2010 income tax forms Line 8. 2010 income tax forms   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. 2010 income tax forms Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. 2010 income tax forms Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. 2010 income tax forms If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). 2010 income tax forms Line 9. 2010 income tax forms   If line 8 is more than line 3, do one of the following. 2010 income tax forms If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. 2010 income tax forms If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. 2010 income tax forms If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. 2010 income tax forms    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. 2010 income tax forms See Reimbursement Received After Deducting Loss, later. 2010 income tax forms Lines 10–18. 2010 income tax forms   Complete these lines according to the Instructions for Form 4684. 2010 income tax forms Choosing not to follow this special procedure. 2010 income tax forms   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. 2010 income tax forms This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . 2010 income tax forms Furthermore, you must have proof that shows the following. 2010 income tax forms The loss is properly deductible in the tax year you claimed it and not in some other year. 2010 income tax forms See When To Report Gains and Losses , later. 2010 income tax forms The amount of the claimed loss. 2010 income tax forms See Proof of Loss , later. 2010 income tax forms No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. 2010 income tax forms See When To Report Gains and Losses , later. 2010 income tax forms Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. 2010 income tax forms The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. 2010 income tax forms You do not need to show a conviction for theft. 2010 income tax forms Theft includes the taking of money or property by the following means. 2010 income tax forms Blackmail. 2010 income tax forms Burglary. 2010 income tax forms Embezzlement. 2010 income tax forms Extortion. 2010 income tax forms Kidnapping for ransom. 2010 income tax forms Larceny. 2010 income tax forms Robbery. 2010 income tax forms The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 2010 income tax forms Decline in market value of stock. 2010 income tax forms   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. 2010 income tax forms However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. 2010 income tax forms You report a capital loss on Schedule D (Form 1040). 2010 income tax forms For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 2010 income tax forms Mislaid or lost property. 2010 income tax forms    The simple disappearance of money or property is not a theft. 2010 income tax forms However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 2010 income tax forms Sudden, unexpected, and unusual events were defined earlier under Casualty . 2010 income tax forms Example. 2010 income tax forms A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2010 income tax forms The diamond falls from the ring and is never found. 2010 income tax forms The loss of the diamond is a casualty. 2010 income tax forms Losses from Ponzi-type investment schemes. 2010 income tax forms   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. 2010 income tax forms R. 2010 income tax forms B. 2010 income tax forms 735 (available at www. 2010 income tax forms irs. 2010 income tax forms gov/irb/2009-14_IRB/ar07. 2010 income tax forms html). 2010 income tax forms Revenue Procedure 2009-20, 2009-14 I. 2010 income tax forms R. 2010 income tax forms B. 2010 income tax forms 749 (available at www. 2010 income tax forms irs. 2010 income tax forms gov/irb/2009-14_IRB/ar11. 2010 income tax forms html). 2010 income tax forms Revenue Procedure 2011-58, 2011-50 I. 2010 income tax forms R. 2010 income tax forms B. 2010 income tax forms 847 (available at www. 2010 income tax forms irs. 2010 income tax forms gov/irb/2011-50_IRB/ar11. 2010 income tax forms html). 2010 income tax forms If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. 2010 income tax forms Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. 2010 income tax forms Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 2010 income tax forms You do not need to complete Appendix A. 2010 income tax forms For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. 2010 income tax forms   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. 2010 income tax forms Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. 2010 income tax forms If you incurred this type of loss, you can choose one of the following ways to deduct the loss. 2010 income tax forms As a casualty loss. 2010 income tax forms As an ordinary loss. 2010 income tax forms As a nonbusiness bad debt. 2010 income tax forms Casualty loss or ordinary loss. 2010 income tax forms   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. 2010 income tax forms The choice generally is made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. 2010 income tax forms If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. 2010 income tax forms However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. 2010 income tax forms Once you make the choice, you cannot change it without permission from the Internal Revenue Service. 2010 income tax forms   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 2010 income tax forms The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. 2010 income tax forms Your loss is subject to the 2%-of-adjusted-gross-income limit. 2010 income tax forms You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. 2010 income tax forms Nonbusiness bad debt. 2010 income tax forms   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. 2010 income tax forms How to report. 2010 income tax forms   The kind of deduction you choose for your loss on deposits determines how you report your loss. 2010 income tax forms See Table 1. 2010 income tax forms More information. 2010 income tax forms   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. 2010 income tax forms Deducted loss recovered. 2010 income tax forms   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. 2010 income tax forms If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. 2010 income tax forms For more information, see Recoveries in Publication 525. 2010 income tax forms Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. 2010 income tax forms You also must be able to support the amount you take as a deduction. 2010 income tax forms Casualty loss proof. 2010 income tax forms   For a casualty loss, you should be able to show all of the following. 2010 income tax forms The type of casualty (car accident, fire, storm, etc. 2010 income tax forms ) and when it occurred. 2010 income tax forms That the loss was a direct result of the casualty. 2010 income tax forms That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage. 2010 income tax forms Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2010 income tax forms Theft loss proof. 2010 income tax forms   For a theft loss, you should be able to show all of the following. 2010 income tax forms When you discovered that your property was missing. 2010 income tax forms That your property was stolen. 2010 income tax forms That you were the owner of the property. 2010 income tax forms Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2010 income tax forms    It is important that you have records that will prove your deduction. 2010 income tax forms If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. 2010 income tax forms Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. 2010 income tax forms Table 1. 2010 income tax forms Reporting Loss on Deposits IF you choose to report the loss as a(n). 2010 income tax forms . 2010 income tax forms . 2010 income tax forms   THEN report it on. 2010 income tax forms . 2010 income tax forms . 2010 income tax forms casualty loss   Form 4684 and Schedule A  (Form 1040). 2010 income tax forms ordinary loss   Schedule A (Form 1040). 2010 income tax forms nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). 2010 income tax forms Amount of loss. 2010 income tax forms   Figure the amount of your loss using the following steps. 2010 income tax forms Determine your adjusted basis in the property before the casualty or theft. 2010 income tax forms Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. 2010 income tax forms From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. 2010 income tax forms For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. 2010 income tax forms Gain from reimbursement. 2010 income tax forms   If your reimbursement is more than your adjusted basis in the property, you have a gain. 2010 income tax forms This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. 2010 income tax forms If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. 2010 income tax forms See Figuring a Gain , later. 2010 income tax forms Business or income-producing property. 2010 income tax forms   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. 2010 income tax forms Your loss is figured as follows:   Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive   Loss of inventory. 2010 income tax forms   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. 2010 income tax forms   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. 2010 income tax forms Do not claim this loss again as a casualty or theft loss. 2010 income tax forms If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. 2010 income tax forms   The other way is to deduct the loss separately. 2010 income tax forms If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. 2010 income tax forms Reduce the loss by the reimbursement you received. 2010 income tax forms Do not include the reimbursement in gross income. 2010 income tax forms If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. 2010 income tax forms Leased property. 2010 income tax forms   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. 2010 income tax forms Separate computations. 2010 income tax forms   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. 2010 income tax forms Then combine the losses to determine the total loss from that casualty or theft. 2010 income tax forms Exception for personal-use real property. 2010 income tax forms   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. 2010 income tax forms Figure the loss using the smaller of the following. 2010 income tax forms The decrease in FMV of the entire property. 2010 income tax forms The adjusted basis of the entire property. 2010 income tax forms   See Real property under Figuring the Deduction, later. 2010 income tax forms Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. 2010 income tax forms The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. 2010 income tax forms FMV of stolen property. 2010 income tax forms   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. 2010 income tax forms Example. 2010 income tax forms Several years ago, you purchased silver dollars at face value for $150. 2010 income tax forms This is your adjusted basis in the property. 2010 income tax forms Your silver dollars were stolen this year. 2010 income tax forms The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. 2010 income tax forms Your theft loss is $150. 2010 income tax forms Recovered stolen property. 2010 income tax forms   Recovered stolen property is your property that was stolen and later returned to you. 2010 income tax forms If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. 2010 income tax forms Use this amount to refigure your total loss for the year in which the loss was deducted. 2010 income tax forms   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. 2010 income tax forms But report the difference only up to the amount of the loss that reduced your tax. 2010 income tax forms For more information on the amount to report, see Recoveries in Publication 525. 2010 income tax forms Figuring Decrease in FMV — Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. 2010 income tax forms However, other measures also can be used to establish certain decreases. 2010 income tax forms See Appraisal and Cost of cleaning up or making repairs , next. 2010 income tax forms Appraisal. 2010 income tax forms   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. 2010 income tax forms The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 2010 income tax forms This information is needed to limit any deduction to the actual loss resulting from damage to the property. 2010 income tax forms   Several factors are important in evaluating the accuracy of an appraisal, including the following. 2010 income tax forms The appraiser's familiarity with your property before and after the casualty or theft. 2010 income tax forms The appraiser's knowledge of sales of comparable property in the area. 2010 income tax forms The appraiser's knowledge of conditions in the area of the casualty. 2010 income tax forms The appraiser's method of appraisal. 2010 income tax forms You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. 2010 income tax forms For more information on disasters, see Disaster Area Losses, later. 2010 income tax forms Cost of cleaning up or making repairs. 2010 income tax forms   The cost of repairing damaged property is not part of a casualty loss. 2010 income tax forms Neither is the cost of cleaning up after a casualty. 2010 income tax forms But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 2010 income tax forms The repairs are actually made. 2010 income tax forms The repairs are necessary to bring the property back to its condition before the casualty. 2010 income tax forms The amount spent for repairs is not excessive. 2010 income tax forms The repairs take care of the damage only. 2010 income tax forms The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 2010 income tax forms Landscaping. 2010 income tax forms   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. 2010 income tax forms You may be able to measure your loss by what you spend on the following. 2010 income tax forms Removing destroyed or damaged trees and shrubs, minus any salvage you receive. 2010 income tax forms Pruning and other measures taken to preserve damaged trees and shrubs. 2010 income tax forms Replanting necessary to restore the property to its approximate value before the casualty. 2010 income tax forms Car value. 2010 income tax forms   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. 2010 income tax forms You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. 2010 income tax forms The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. 2010 income tax forms If your car is not listed in the books, determine its value from other sources. 2010 income tax forms A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. 2010 income tax forms Figuring Decrease in FMV — Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. 2010 income tax forms Cost of protection. 2010 income tax forms   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. 2010 income tax forms The amount you spend on insurance or to board up your house against a storm is not part of your loss. 2010 income tax forms If the property is business property, these expenses are deductible as business expenses. 2010 income tax forms   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. 2010 income tax forms An example would be the cost of a dike to prevent flooding. 2010 income tax forms Exception. 2010 income tax forms   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments (discussed later under Disaster Area Losses ). 2010 income tax forms Related expenses. 2010 income tax forms   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. 2010 income tax forms However, they may be deductible as business expenses if the damaged or stolen property is business property. 2010 income tax forms Replacement cost. 2010 income tax forms   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. 2010 income tax forms Example. 2010 income tax forms You bought a new chair 4 years ago for $300. 2010 income tax forms In April, a fire destroyed the chair. 2010 income tax forms You estimate that it would cost $500 to replace it. 2010 income tax forms If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. 2010 income tax forms The chair was not insured. 2010 income tax forms Your loss is $100, the FMV of the chair before the fire. 2010 income tax forms It is not $500, the replacement cost. 2010 income tax forms Sentimental value. 2010 income tax forms   Do not consider sentimental value when determining your loss. 2010 income tax forms If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. 2010 income tax forms Decline in market value of property in or near casualty area. 2010 income tax forms   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. 2010 income tax forms You have a loss only for actual casualty damage to your property. 2010 income tax forms However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. 2010 income tax forms Costs of photographs and appraisals. 2010 income tax forms   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. 2010 income tax forms Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. 2010 income tax forms   Appraisals are used to figure the decrease in FMV because of a casualty or theft. 2010 income tax forms See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. 2010 income tax forms   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. 2010 income tax forms They are expenses in determining your tax liability. 2010 income tax forms You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). 2010 income tax forms Adjusted Basis The measure of your investment in the property you own is its basis. 2010 income tax forms For property you buy, your basis is usually its cost to you. 2010 income tax forms For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. 2010 income tax forms If you inherited the property from someone 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. 2010 income tax forms Adjustments to basis. 2010 income tax forms    While you own the property, various events may take place that change your basis. 2010 income tax forms Some events, such as additions or permanent improvements to the property, increase basis. 2010 income tax forms Others, such as earlier casualty losses and depreciation deductions, decrease basis. 2010 income tax forms When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. 2010 income tax forms See Publication 551 for more information on figuring the basis of your property. 2010 income tax forms Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 2010 income tax forms You do not have a casualty or theft loss to the extent you are reimbursed. 2010 income tax forms If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 2010 income tax forms You must reduce your loss even if you do not receive payment until a later tax year. 2010 income tax forms See Reimbursement Received After Deducting Loss , later. 2010 income tax forms Failure to file a claim for reimbursement. 2010 income tax forms   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. 2010 income tax forms Otherwise, you cannot deduct this loss as a casualty or theft. 2010 income tax forms The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. 2010 income tax forms Example. 2010 income tax forms You have a car insurance policy with a $1,000 deductible. 2010 income tax forms Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). 2010 income tax forms This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. 2010 income tax forms Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. 2010 income tax forms Other types of reimbursements are discussed next. 2010 income tax forms Also see the Instructions for Form 4684. 2010 income tax forms Employer's emergency disaster fund. 2010 income tax forms   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. 2010 income tax forms Take into consideration only the amount you used to replace your destroyed or damaged property. 2010 income tax forms Example. 2010 income tax forms Your home was extensively damaged by a tornado. 2010 income tax forms Your loss after reimbursement from your insurance company was $10,000. 2010 income tax forms Your employer set up a disaster relief fund for its employees. 2010 income tax forms Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. 2010 income tax forms You received $4,000 from the fund and spent the entire amount on repairs to your home. 2010 income tax forms In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. 2010 income tax forms Your casualty loss before applying the deduction limits (discussed later) is $6,000. 2010 income tax forms Cash gifts. 2010 income tax forms   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. 2010 income tax forms This applies even if you use the money to pay for repairs to property damaged in the disaster. 2010 income tax forms Example. 2010 income tax forms Your home was damaged by a hurricane. 2010 income tax forms Relatives and neighbors made cash gifts to you that were excludable from your income. 2010 income tax forms You used part of the cash gifts to pay for repairs to your home. 2010 income tax forms There were no limits or restrictions on how you could use the cash gifts. 2010 income tax forms It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. 2010 income tax forms Insurance payments for living expenses. 2010 income tax forms   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. 2010 income tax forms You lose the use of your main home because of a casualty. 2010 income tax forms Government authorities do not allow you access to your main home because of a casualty or threat of one. 2010 income tax forms Inclusion in income. 2010 income tax forms   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. 2010 income tax forms Report this amount on Form 1040, line 21. 2010 income tax forms However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. 2010 income tax forms See Qualified disaster relief payments , later, under Disaster Area Losses. 2010 income tax forms   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. 2010 income tax forms Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. 2010 income tax forms Generally, these expenses include the amounts you pay for the following. 2010 income tax forms Renting suitable housing. 2010 income tax forms Transportation. 2010 income tax forms Food. 2010 income tax forms Utilities. 2010 income tax forms Miscellaneous services. 2010 income tax forms Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. 2010 income tax forms Example. 2010 income tax forms As a result of a fire, you vacated your apartment for a month and moved to a motel. 2010 income tax forms You normally pay $525 a month for rent. 2010 income tax forms None was charged for the month the apartment was vacated. 2010 income tax forms Your motel rent for this month was $1,200. 2010 income tax forms You normally pay $200 a month for food. 2010 income tax forms Your food expenses for the month you lived in the motel were $400. 2010 income tax forms You received $1,100 from your insurance company to cover your living expenses. 2010 income tax forms You determine the payment you must include in income as follows. 2010 income tax forms 1. 2010 income tax forms Insurance payment for living expenses $1,100 2. 2010 income tax forms Actual expenses during the month you are unable to use your home because of the fire $1,600   3. 2010 income tax forms Normal living expenses 725   4. 2010 income tax forms Temporary increase in living expenses: Subtract line 3  from line 2 875 5. 2010 income tax forms Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. 2010 income tax forms   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. 2010 income tax forms Example. 2010 income tax forms Your main home was destroyed by a tornado in August 2011. 2010 income tax forms You regained use of your home in November 2012. 2010 income tax forms The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. 2010 income tax forms You include this amount in income on your 2012 Form 1040. 2010 income tax forms If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. 2010 income tax forms Disaster relief. 2010 income tax forms   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. 2010 income tax forms Table 2. 2010 income tax forms Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. 2010 income tax forms Apply this rule to personal-use property after you have figured the amount of your loss. 2010 income tax forms You must reduce your total casualty or theft loss by 10% of your adjusted gross income. 2010 income tax forms Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). 2010 income tax forms You must reduce your total casualty or theft loss by 2% of your adjusted gross income. 2010 income tax forms Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. 2010 income tax forms Single Event Apply this rule only once, even if many pieces of property are affected. 2010 income tax forms Apply this rule only once, even if many pieces of property are affected. 2010 income tax forms Apply this rule only once, even if many pieces of property are affected. 2010 income tax forms More Than One Event Apply to the loss from each event. 2010 income tax forms Apply to the total of all your losses from all events. 2010 income tax forms Apply to the total of all your losses from all events. 2010 income tax forms More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. 2010 income tax forms Apply separately to each person. 2010 income tax forms Apply separately to each person. 2010 income tax forms Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. 2010 income tax forms Apply as if you were one person. 2010 income tax forms Apply as if you were one person. 2010 income tax forms Filing Separate Return Apply separately to each spouse. 2010 income tax forms Apply separately to each spouse. 2010 income tax forms Apply separately to each spouse. 2010 income tax forms More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. 2010 income tax forms Apply separately to each owner of jointly owned property. 2010 income tax forms Apply separately to each owner of jointly owned property. 2010 income tax forms    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. 2010 income tax forms For more information, see Qualified disaster relief payments under Disaster Area Losses, later. 2010 income tax forms   Disaster unemployment assistance payments are unemployment benefits that are taxable. 2010 income tax forms   Generally, disaster relief grants received under the Robert T. 2010 income tax forms Stafford Disaster Relief and Emergency Assistance Act are not included in your income. 2010 income tax forms See Federal disaster relief grants , later, under Disaster Area Losses. 2010 income tax forms Loan proceeds. 2010 income tax forms   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. 2010 income tax forms If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. 2010 income tax forms Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. 2010 income tax forms This section explains the adjustment you may have to make. 2010 income tax forms Actual reimbursement less than expected. 2010 income tax forms   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. 2010 income tax forms Example. 2010 income tax forms Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. 2010 income tax forms The accident was due to the negligence of the other driver. 2010 income tax forms At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. 2010 income tax forms You did not have a deductible loss in 2012. 2010 income tax forms In January 2013, the court awards you a judgment of $2,000. 2010 income tax forms However, in July it becomes apparent that you will be unable to collect any amount from the other driver. 2010 income tax forms Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). 2010 income tax forms Actual reimbursement more than expected. 2010 income tax forms   If you later receive more reimbursement than you expected, after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 2010 income tax forms However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. 2010 income tax forms You do not refigure your tax for the year you claimed the deduction. 2010 income tax forms See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. 2010 income tax forms Example. 2010 income tax forms In 2012, a hurricane destroyed your motorboat. 2010 income tax forms Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. 2010 income tax forms You did not itemize deductions on your 2012 return, so you could not deduct the loss. 2010 income tax forms When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. 2010 income tax forms This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. 2010 income tax forms The loss did not reduce your tax. 2010 income tax forms    If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. 2010 income tax forms If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. 2010 income tax forms Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. 2010 income tax forms You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. 2010 income tax forms Actual reimbursement same as expected. 2010 income tax forms   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. 2010 income tax forms Example. 2010 income tax forms In December 2013, you had a collision while driving your personal car. 2010 income tax forms Repairs to the car cost $950. 2010 income tax forms You had $100 deductible collision insurance. 2010 income tax forms Your insurance company agreed to reimburse you for the rest of the damage. 2010 income tax forms Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. 2010 income tax forms Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. 2010 income tax forms When you receive the $850 from the insurance company in 2014, do not report it as income. 2010 income tax forms Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. 2010 income tax forms The deduction for casualty and theft losses of employee property and personal-use property is limited. 2010 income tax forms A loss on employee property is subject to the 2% rule, discussed next. 2010 income tax forms With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. 2010 income tax forms The 2%, $100, and 10% rules are also summarized in Table 2 . 2010 income tax forms Losses on business property (other than employee property) and income-producing property are not subject to these rules. 2010 income tax forms However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. 2010 income tax forms See the Instructions for Form 4684, Section B. 2010 income tax forms If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. 2010 income tax forms 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. 2010 income tax forms Employee property is property used in performing services as an employee. 2010 income tax forms $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. 2010 income tax forms This reduction applies to each total casualty or theft loss. 2010 income tax forms It does not matter how many pieces of property are involved in an event. 2010 income tax forms Only a single $100 reduction applies. 2010 income tax forms Example. 2010 income tax forms You have $750 deductible collision insurance on your car. 2010 income tax forms The car is damaged in a collision. 2010 income tax forms The insurance company pays you for the damage minus the $750 deductible. 2010 income tax forms The amount of the casualty loss is based solely on the deductible. 2010 income tax forms The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. 2010 income tax forms Single event. 2010 income tax forms   Generally, events closely related in origin cause a single casualty. 2010 income tax forms It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. 2010 income tax forms A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. 2010 income tax forms Example 1. 2010 income tax forms A thunderstorm destroyed your pleasure boat. 2010 income tax forms You also lost some boating equipment in the storm. 2010 income tax forms Your loss was $5,000 on the boat and $1,200 on the equipment. 2010 income tax forms Your insurance company reimbursed you $4,500 for the damage to your boat. 2010 income tax forms You had no insurance coverage on the equipment. 2010 income tax forms Your casualty loss is from a single event and the $100 rule applies once. 2010 income tax forms Figure your loss before applying the 10% rule (discussed later) as follows. 2010 income tax forms     Boat Equipment 1. 2010 income tax forms Loss $5,000 $1,200 2. 2010 income tax forms Subtract insurance 4,500 -0- 3. 2010 income tax forms Loss after reimbursement $ 500 $1,200 4. 2010 income tax forms Total loss $1,700 5. 2010 income tax forms Subtract $100 100 6. 2010 income tax forms Loss before 10% rule $1,600 Example 2. 2010 income tax forms Thieves broke into your home in January and stole a ring and a fur coat. 2010 income tax forms You had a loss of $200 on the ring and $700 on the coat. 2010 income tax forms This is a single theft. 2010 income tax forms The $100 rule applies to the total $900 loss. 2010 income tax forms Example 3. 2010 income tax forms In September, hurricane winds blew the roof off your home. 2010 income tax forms Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. 2010 income tax forms This is considered a single casualty. 2010 income tax forms The $100 rule is applied to your total loss from the flood waters and the wind. 2010 income tax forms More than one loss. 2010 income tax forms   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. 2010 income tax forms Example. 2010 income tax forms Your family car was damaged in an accident in January. 2010 income tax forms Your loss after the insurance reimbursement was $75. 2010 income tax forms In February, your car was damaged in another accident. 2010 income tax forms This time your loss after the insurance reimbursement was $90. 2010 income tax forms Apply the $100 rule to each separate casualty loss. 2010 income tax forms Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. 2010 income tax forms More than one person. 2010 income tax forms   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. 2010 income tax forms Example. 2010 income tax forms A fire damaged your house and also damaged the personal property of your house guest. 2010 income tax forms You must reduce your loss by $100. 2010 income tax forms Your house guest must reduce his or her loss by $100. 2010 income tax forms Married taxpayers. 2010 income tax forms   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. 2010 income tax forms It does not matter whether you own the property jointly or separately. 2010 income tax forms   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. 2010 income tax forms This is true even if you own the property jointly. 2010 income tax forms If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. 2010 income tax forms   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. 2010 income tax forms Neither of you can figure your deduction on the entire loss on a separate return. 2010 income tax forms Each of you must reduce the loss by $100. 2010 income tax forms More than one owner. 2010 income tax forms   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. 2010 income tax forms For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. 2010 income tax forms 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. 2010 income tax forms Apply this rule after you reduce each loss by $100. 2010 income tax forms For more information, see the Form 4684 instructions. 2010 income tax forms If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. 2010 income tax forms Example. 2010 income tax forms In June, you discovered that your house had been burglarized. 2010 income tax forms Your loss after insurance reimbursement was $2,000. 2010 income tax forms Your adjusted gross income for the year you discovered the theft is $29,500. 2010 income tax forms Figure your theft loss as follows. 2010 income tax forms 1. 2010 income tax forms Loss after insurance $2,000 2. 2010 income tax forms Subtract $100 100 3. 2010 income tax forms Loss after $100 rule $1,900 4. 2010 income tax forms Subtract 10% of $29,500 AGI $2,950 5. 2010 income tax forms Theft loss deduction $-0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($2,950). 2010 income tax forms More than one loss. 2010 income tax forms   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. 2010 income tax forms Then you must reduce the total of all your losses by 10% of your adjusted gross income. 2010 income tax forms Example. 2010 income tax forms In March, you had a car accident that totally destroyed your car. 2010 income tax forms You did not have collision insurance on your car, so you did not receive any insurance reimbursement. 2010 income tax forms Your loss on the car was $1,800. 2010 income tax forms In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. 2010 income tax forms Your loss on the basement items after reimbursement was $2,100. 2010 income tax forms Your adjusted gross income for the year that the accident and fire occurred is $25,000. 2010 income tax forms You figure your casualty loss deduction as follows. 2010 income tax forms     Car Basement 1. 2010 income tax forms Loss $1,800 $2,100 2. 2010 income tax forms Subtract $100 per incident 100 100 3. 2010 income tax forms Loss after $100 rule $1,700 $2,000 4. 2010 income tax forms Total loss $3,700 5. 2010 income tax forms Subtract 10% of $25,000 AGI 2,500 6. 2010 income tax forms Casualty loss deduction $1,200 Married taxpayers. 2010 income tax forms   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. 2010 income tax forms It does not matter if you own the property jointly or separately. 2010 income tax forms   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. 2010 income tax forms More than one owner. 2010 income tax forms   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. 2010 income tax forms Gains and losses. 2010 income tax forms   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. 2010 income tax forms Do this after you have reduced each loss by any reimbursements and by $100 but before you have reduced the losses by 10% of your adjusted gross income. 2010 income tax forms Casualty or theft gains do not include gains you choose to postpone. 2010 income tax forms See Postponement of Gain, later. 2010 income tax forms Losses more than gains. 2010 income tax forms   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. 2010 income tax forms The rest, if any, is your deductible loss from personal-use property. 2010 income tax forms Example. 2010 income tax forms Your theft loss after reducing it by reimbursements and by $100 is $2,700. 2010 income tax forms Your casualty gain is $700. 2010 income tax forms Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. 2010 income tax forms Gains more than losses. 2010 income tax forms   If your recognized gains are more than your losses, subtract your losses from your gains. 2010 income tax forms The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). 2010 income tax forms The 10% rule does not apply to your gains. 2010 income tax forms Example. 2010 income tax forms Your theft loss is $600 after reducing it by reimbursements and by $100. 2010 income tax forms Your casualty gain is $1,600. 2010 income tax forms Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). 2010 income tax forms More information. 2010 income tax forms   For information on how to figure recognized gains, see Figuring a Gain , later. 2010 income tax forms Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. 2010 income tax forms However, a special rule applies to real property you own for personal use. 2010 income tax forms Real property. 2010 income tax forms   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. 2010 income tax forms Example 1. 2010 income tax forms In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. 2010 income tax forms (Your land was not damaged. 2010 income tax forms ) This was your only casualty or theft loss for the year. 2010 income tax forms The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). 2010 income tax forms The FMV immediately after the fire was $35,000 (value of the land). 2010 income tax forms You collected $130,000 from the insurance company. 2010 income tax forms Your adjusted gross income for the year the fire occurred is $80,000. 2010 income tax forms Your deduction for the casualty loss is $6,700, figured in the following manner. 2010 income tax forms 1. 2010 income tax forms Adjusted basis of the entire property (cost in this example) $144,800 2. 2010 income tax forms FMV of entire property  before fire $180,000 3. 2010 income tax forms FMV of entire property after fire 35,000 4. 2010 income tax forms Decrease in FMV of entire property (line 2 − line 3) $145,000 5. 2010 income tax forms Loss (smaller of line 1 or line 4) $144,800 6. 2010 income tax forms Subtract insurance 130,000 7. 2010 income tax forms Loss after reimbursement $14,800 8. 2010 income tax forms Subtract $100 100 9. 2010 income tax forms Loss after $100 rule $14,700 10. 2010 income tax forms Subtract 10% of $80,000 AGI 8,000 11. 2010 income tax forms Casualty loss deduction $ 6,700 Example 2. 2010 income tax forms You bought your home a few years ago. 2010 income tax forms You paid $150,000 ($10,000 for the land and $140,000 for the house). 2010 income tax forms You also spent an additional $2,000 for landscaping. 2010 income tax forms This year a fire destroyed your home. 2010 income tax forms The fire also damaged the shrubbery and trees in your yard. 2010 income tax forms The fire was your only casualty or theft loss this year. 2010 income tax forms Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. 2010 income tax forms Shortly after the fire, the insurance company paid you $95,000 for the loss. 2010 income tax forms Your adjusted gross income for this year is $70,000. 2010 income tax forms You figure your casualty loss deduction as follows. 2010 income tax forms 1. 2010 income tax forms Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. 2010 income tax forms FMV of entire property  before fire $175,000 3. 2010 income tax forms FMV of entire property after fire 50,000 4. 2010 income tax forms Decrease in FMV of entire property (line 2 − line 3) $125,000 5. 2010 income tax forms Loss (smaller of line 1 or line 4) $125,000 6. 2010 income tax forms Subtract insurance 95,000 7. 2010 income tax forms Loss after reimbursement $30,000 8. 2010 income tax forms Subtract $100 100 9. 2010 income tax forms Loss after $100 rule $29,900 10. 2010 income tax forms Subtract 10% of $70,000 AGI 7,000 11. 2010 income tax forms Casualty loss deduction $ 22,900 Personal property. 2010 income tax forms   Personal property is any property that is not real property. 2010 income tax forms If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. 2010 income tax forms Then combine these separate losses to figure the total loss. 2010 income tax forms Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. 2010 income tax forms Example 1. 2010 income tax forms In August, a storm destroyed your pleasure boat, which cost $18,500. 2010 income tax forms This was your only casualty or theft loss for the year. 2010 income tax forms Its FMV immediately before the storm was $17,000. 2010 income tax forms You had no insurance, but were able to salvage the motor of the boat and sell it for $200. 2010 income tax forms Your adjusted gross income for the year the casualty occurred is $70,000. 2010 income tax forms Although the motor was sold separately, it is part of the boat and not a separate item of property. 2010 income tax forms You figure your casualty loss deduction as follows. 2010 income tax forms 1. 2010 income tax forms Adjusted basis (cost in this example) $18,500 2. 2010 income tax forms FMV before storm $17,000 3. 2010 income tax forms FMV after storm 200 4. 2010 income tax forms Decrease in FMV  (line 2 − line 3) $16,800 5. 2010 income tax forms Loss (smaller of line 1 or line 4) $16,800 6. 2010 income tax forms Subtract insurance -0- 7. 2010 income tax forms Loss after reimbursement $16,800 8. 2010 income tax forms Subtract $100 100 9. 2010 income tax forms Loss after $100 rule $16,700 10. 2010 income tax forms Subtract 10% of $70,000 AGI 7,000 11. 2010 income tax forms Casualty loss deduction $ 9,700 Example 2. 2010 income tax forms In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. 2010 income tax forms You had bought the car for $30,000. 2010 income tax forms The FMV of the car just before the accident was $17,500. 2010 income tax forms Its FMV just after the accident was $180 (scrap value). 2010 income tax forms Your insurance company reimbursed you $16,000. 2010 income tax forms Your watch was not insured. 2010 income tax forms You had purchased it for $250. 2010 income tax forms Its FMV just before the accident was $500. 2010 income tax forms Your adjusted gross income for the year the accident occurred is $97,000. 2010 income tax forms Your casualty loss deduction is zero, figured as follows. 2010 income tax forms     Car Watch 1. 2010 income tax forms Adjusted basis (cost) $30,000 $250 2. 2010 income tax forms FMV before accident $17,500 $500 3. 2010 income tax forms FMV after accident 180 -0- 4. 2010 income tax forms Decrease in FMV (line 2 − line 3) $17,320 $500 5. 2010 income tax forms Loss (smaller of line 1 or line 4) $17,320 $250 6. 2010 income tax forms Subtract insurance 16,000 -0- 7. 2010 income tax forms Loss after reimbursement $1,320 $250 8. 2010 income tax forms Total loss $1,570 9. 2010 income tax forms Subtract $100 100 10. 2010 income tax forms Loss after $100 rule $1,470 11. 2010 income tax forms Subtract 10% of $97,000 AGI 9,700 12. 2010 income tax forms Casualty loss deduction $ -0- Both real and personal properties. 2010 income tax forms   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. 2010 income tax forms However, you apply a single $100 reduction to the total loss. 2010 income tax forms Then, you apply the 10% rule to figure the casualty loss deduction. 2010 income tax forms Example. 2010 income tax forms In July, a hurricane damaged your home, which cost you $164,000 including land. 2010 income tax forms The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. 2010 income tax forms Your household furnishings were also damaged. 2010 income tax forms You separately figured the loss on each damaged household item and arrived at a total loss of $600. 2010 income tax forms You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. 2010 income tax forms Your adjusted gross income for the year the hurricane occurred is $65,000. 2010 income tax forms You figure your casualty loss deduction from the hurricane in the following manner. 2010 income tax forms 1. 2010 income tax forms Adjusted basis of real property (cost in this example) $164,000 2. 2010 income tax forms FMV of real property before hurricane $170,000 3. 2010 income tax forms FMV of real property after hurricane 100,000 4. 2010 income tax forms Decrease in FMV of real property (line 2 − line 3) $70,000 5. 2010 income tax forms Loss on real property (smaller of line 1 or line 4) $70,000 6. 2010 income tax forms Subtract insurance 50,000 7. 2010 income tax forms Loss on real property after reimbursement $20,000 8. 2010 income tax forms Loss on furnishings $600 9. 2010 income tax forms Subtract insurance -0- 10. 2010 income tax forms Loss on furnishings after reimbursement $600 11. 2010 income tax forms Total loss (line 7 plus line 10) $20,600 12. 2010 income tax forms Subtract $100 100 13. 2010 income tax forms Loss after $100 rule $20,500 14. 2010 income tax forms Subtract 10% of $65,000 AGI 6,500 15. 2010 income tax forms Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. 2010 income tax forms   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. 2010 income tax forms You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. 2010 income tax forms When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. 2010 income tax forms The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. 2010 income tax forms Example. 2010 income tax forms You own a building that you constructed on leased land. 2010 income tax forms You use half of the building for your business and you live in the other half. 2010 income tax forms The cost of the building was $400,000. 2010 income tax forms You made no further improvements or additions to it. 2010 income tax forms A flood in March damaged the entire building. 2010 income tax forms The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. 2010 income tax forms Your insurance company reimbursed you $40,000 for the flood damage. 2010 income tax forms Depreciation on the business part of the building before the flood totaled $24,000. 2010 income tax forms Your adjusted gross income for the year the flood occurred is $125,000. 2010 income tax forms You have a deductible business casualty loss of $10,000. 2010 income tax forms You do not have a deductible personal casualty loss because of the 10% rule. 2010 income tax forms You figure your loss as follows. 2010 income tax forms     Business   Personal     Part   Part 1. 2010 income tax forms Cost (total $400,000) $200,000   $200,000 2. 2010 income tax forms Subtract depreciation 24,000   -0- 3. 2010 income tax forms Adjusted basis $176,000   $200,000 4. 2010 income tax forms FMV before flood (total $380,000) $190,000   $190,000 5. 2010 income tax forms FMV after flood (total $320,000) 160,000   160,000 6. 2010 income tax forms Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. 2010 income tax forms Loss (smaller of line 3 or line 6) $30,000   $30,000 8. 2010 income tax forms Subtract insurance 20,000   20,000 9. 2010 income tax forms Loss after reimbursement $10,000   $10,000 10. 2010 income tax forms Subtract $100 on personal-use property -0-   100 11. 2010 income tax forms Loss after $100 rule $10,000   $9,900 12. 2010 income tax forms Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. 2010 income tax forms Deductible business loss $10,000     14. 2010 income tax forms Deductible personal loss $-0- Figuring a Gain If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. 2010 income tax forms Your gain is figured as follows. 2010 income tax forms The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. 2010 income tax forms See Adjusted Basis , earlier, for information on adjusted basis. 2010 income tax forms Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. 2010 income tax forms Amount you receive. 2010 income tax forms   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. 2010 income tax forms It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. 2010 income tax forms Example. 2010 income tax forms A hurricane destroyed your personal residence and the insurance company awarded you $145,000. 2010 income tax forms You received $140,000 in cash. 2010 income tax forms The remaining $5,000 was paid directly to the holder of a mortgage on the property. 2010 income tax forms The amount you received includes the $5,000 reimbursement paid on the mortgage. 2010 income tax forms Main home destroyed. 2010 income tax forms   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. 2010 income tax forms You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). 2010 income tax forms To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. 2010 income tax forms For information on this exclusion, see Publication 523. 2010 income tax forms If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. 2010 income tax forms See Postponement of Gain , later. 2010 income tax forms Reporting a gain. 2010 income tax forms   You generally must report your gain as income in the year you receive the reimbursement. 2010 income tax forms However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. 2010 income tax forms   For information on how to report a gain, see How To Report Gains and Losses , later. 2010 income tax forms    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. 2010 income tax forms See 10% Rule under Deduction Limits, earlier. 2010 income tax forms Postponement of Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. 2010 income tax forms Your basis in the new property is generally the same as your adjusted basis in the property it replaces. 2010 income tax forms You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. 2010 income tax forms However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. 2010 income tax forms You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. 2010 income tax forms See Controlling interest in a corporation , later. 2010 income tax forms If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. 2010 income tax forms To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. 2010 income tax forms If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. 2010 income tax forms Example. 2010 income tax forms In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. 2010 income tax forms You made no further improvements or additions to it. 2010 income tax forms When a storm destroyed the cottage this January, the cottage was worth $250,000. 2010 income tax forms You received $146,000 from the insurance company in March. 2010 income tax forms You had a gain of $128,000 ($146,000 − $18,000). 2010 income tax forms You spent $144,000 to rebuild the cottage. 2010 income tax forms Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. 2010 income tax forms Buying replacement property from a related person. 2010 income tax forms   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). 2010 income tax forms This rule applies to the following taxpayers. 2010 income tax forms C corporations. 2010 income tax forms Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. 2010 income tax forms All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. 2010 income tax forms For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. 2010 income tax forms If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. 2010 income tax forms If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. 2010 income tax forms Exception. 2010 income tax forms   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the destroyed or stolen property. 2010 income tax forms Related persons. 2010 income tax forms   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. 2010 income tax forms For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 2010 income tax forms Death of a taxpayer. 2010 income tax forms   If a taxpayer dies after having a gain but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. 2010 income tax forms The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. 2010 income tax forms Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. 2010 income tax forms Property you acquire as a gift or inheritance does not qualify. 2010 income tax forms You do not have to use the same funds you receive as
Print - Click this link to Print this page

Problem Alerts

Consumer Alerts

Please note that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

  • ‪If you get an unsolicited email that appears to be from the IRS or a specific IRS component, such as EFTPS, please report it by sending it to phishing@irs.gov. ‪
  • If you find a suspicious website that claims to be the IRS, please send the site’s URL by email to phishing@irs.gov, using the subject line: suspicious website.

For more information on phishing scams, please see Protect Your Personal Information and  Suspicious e-Mails and Identity Theft.

October 2012
Don't Fall for Phony IRS Websites

The IRS warns consumers about a new tax scam that uses a website that mimics the IRS e-Services online registration page.

‪The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one.

The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.

June 2012
Beware of Phony Email from DFAS

Taxpayers should be on the lookout for a new, email-based phishing scam circulating that targets Department of Defense military members, retirees and civilian employees. The email appears to come from Defense Finance and Accounting Services and displays a .mil email address. The email states that those receiving disability compensation from the Department of Veterans Affairs (VA) may be able to obtain additional funds from the IRS. Email recipients are then asked to send various VA and IRS documents containing their personal and financial information, such as copies of VA award letters or their income tax returns, to an address in Florida.

The information on these documents is then used by the scammers to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards or apply for new loans, credit cards, services or benefits in the victim’s name.

For more information on phishing scams, please see Suspicious e-Mails and Identity Theft.

November 2011
The IRS Warns of Scam Emails

Update Nov. 10, 2011 — A suspected phishing email on the Employer Identification Number (EIN), claiming to come from the IRS Office of Professional Responsibility, is currently circulating. This email was not sent by the IRS. For more information, see Latest News from Office of Professional Responsibility (OPR).

The IRS does not send unsolicited e-mail to taxpayers either about their tax accounts or requesting sensitive personal and financial information.       

Nevertheless, taxpayers do receive e-mails claiming to come from the IRS, sometimes containing a real or made-up employee name, address and similar information to make an e-mail seem credible.    

These e-mails usually are scams whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers which can be used by the scammers to commit identity theft. Identity thieves use the data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns and more.

Typically, IRS-impersonation scam e-mails state that the IRS needs certain personal and financial information to process a tax return, tax payment or refund. They may claim the e-mail recipient is being audited. They may mention specific monetary amounts or genuine programs, such as the Electronic Federal Tax Payment System (EFTPS), to add credible detail to the scam. The e-mails often contain links or attachments to what appears to be the IRS web site or an IRS form. However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for.

Alternatively, a link in a scam e-mail may download malicious software onto the taxpayer's computer when clicked. The software is often designed to search out and send back to the scammer personal and financial information contained on the taxpayer's computer or obtained through keystrokes that the scammer can use to commit identity theft.             

 



 

Page Last Reviewed or Updated: 27-Sep-2013

The 2010 Income Tax Forms

2010 income tax forms 4. 2010 income tax forms   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. 2010 income tax forms Resident aliens are generally taxed in the same way as U. 2010 income tax forms S. 2010 income tax forms citizens. 2010 income tax forms Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business and how it is taxed. 2010 income tax forms Topics - This chapter discusses: Income that is effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms Income that is not effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms Interrupted period of residence. 2010 income tax forms Expatriation tax. 2010 income tax forms Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. 2010 income tax forms Resident Aliens Resident aliens are generally taxed in the same way as U. 2010 income tax forms S. 2010 income tax forms citizens. 2010 income tax forms This means that their worldwide income is subject to U. 2010 income tax forms S. 2010 income tax forms tax and must be reported on their U. 2010 income tax forms S. 2010 income tax forms tax return. 2010 income tax forms Income of resident aliens is subject to the graduated tax rates that apply to U. 2010 income tax forms S. 2010 income tax forms citizens. 2010 income tax forms Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. 2010 income tax forms S. 2010 income tax forms citizens. 2010 income tax forms Nonresident Aliens A nonresident alien's income that is subject to U. 2010 income tax forms S. 2010 income tax forms income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). 2010 income tax forms The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. 2010 income tax forms These are the same rates that apply to U. 2010 income tax forms S. 2010 income tax forms citizens and residents. 2010 income tax forms Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. 2010 income tax forms If you were formerly a U. 2010 income tax forms S. 2010 income tax forms citizen or resident alien, these rules may not apply. 2010 income tax forms See Expatriation Tax, later, in this chapter. 2010 income tax forms Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. 2010 income tax forms Whether you are engaged in a trade or business in the United States depends on the nature of your activities. 2010 income tax forms The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. 2010 income tax forms Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. 2010 income tax forms Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. 2010 income tax forms For more information, see Services Performed for Foreign Employer in chapter 3. 2010 income tax forms Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. 2010 income tax forms Students and trainees. 2010 income tax forms   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. 2010 income tax forms A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2010 income tax forms The taxable part of any scholarship or fellowship grant that is U. 2010 income tax forms S. 2010 income tax forms source income is treated as effectively connected with a trade or business in the United States. 2010 income tax forms Business operations. 2010 income tax forms   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. 2010 income tax forms Partnerships. 2010 income tax forms   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. 2010 income tax forms Beneficiary of an estate or trust. 2010 income tax forms   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. 2010 income tax forms Trading in stocks, securities, and commodities. 2010 income tax forms   If your only U. 2010 income tax forms S. 2010 income tax forms business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. 2010 income tax forms S. 2010 income tax forms resident broker or other agent, you are not engaged in a trade or business in the United States. 2010 income tax forms   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. 2010 income tax forms   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. 2010 income tax forms   This discussion does not apply if you have a U. 2010 income tax forms S. 2010 income tax forms office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. 2010 income tax forms Trading for a nonresident alien's own account. 2010 income tax forms   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. 2010 income tax forms S. 2010 income tax forms business activity. 2010 income tax forms This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. 2010 income tax forms   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. 2010 income tax forms This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. 2010 income tax forms Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . 2010 income tax forms Effectively Connected Income If you are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. 2010 income tax forms This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. 2010 income tax forms Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. 2010 income tax forms In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. 2010 income tax forms For a discussion of these rules, see Foreign Income , later. 2010 income tax forms Investment Income Investment income from U. 2010 income tax forms S. 2010 income tax forms sources that may or may not be treated as effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business generally falls into the following three categories. 2010 income tax forms Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. 2010 income tax forms ). 2010 income tax forms Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. 2010 income tax forms Timber, coal, or domestic iron ore with a retained economic interest. 2010 income tax forms Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. 2010 income tax forms Patents transferred before October 5, 1966. 2010 income tax forms Original issue discount obligations. 2010 income tax forms Capital gains (and losses). 2010 income tax forms Use the two tests, described next, to determine whether an item of U. 2010 income tax forms S. 2010 income tax forms source income falling in one of the three categories above and received during the tax year is effectively connected with your U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. 2010 income tax forms If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. 2010 income tax forms Asset-use test. 2010 income tax forms   This test usually applies to income that is not directly produced by trade or business activities. 2010 income tax forms Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. 2010 income tax forms   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. 2010 income tax forms Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. 2010 income tax forms Business-activities test. 2010 income tax forms   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. 2010 income tax forms The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. 2010 income tax forms Under this test, if the conduct of the U. 2010 income tax forms S. 2010 income tax forms trade or business was a material factor in producing the income, the income is considered effectively connected. 2010 income tax forms Personal Service Income You usually are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business when you perform personal services in the United States. 2010 income tax forms Personal service income you receive in a tax year in which you are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business is effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. 2010 income tax forms Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. 2010 income tax forms The income may be paid to you in the form of cash, services, or property. 2010 income tax forms If you are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. 2010 income tax forms However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. 2010 income tax forms Pensions. 2010 income tax forms   If you were a nonresident alien engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. 2010 income tax forms This is true whether or not you are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business in the year you receive the retirement pay. 2010 income tax forms Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. 2010 income tax forms You had a fixed place of business in the United States involved in earning the income. 2010 income tax forms At least 90% of your U. 2010 income tax forms S. 2010 income tax forms source transportation income is attributable to regularly scheduled transportation. 2010 income tax forms “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. 2010 income tax forms “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. 2010 income tax forms This definition applies to both scheduled and chartered air transportation. 2010 income tax forms If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. 2010 income tax forms See Transportation Tax, later, in this chapter. 2010 income tax forms Business Profits and Losses and Sales Transactions All profits or losses from U. 2010 income tax forms S. 2010 income tax forms sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. 2010 income tax forms For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. 2010 income tax forms A share of U. 2010 income tax forms S. 2010 income tax forms source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. 2010 income tax forms Real Property Gain or Loss Gains and losses from the sale or exchange of U. 2010 income tax forms S. 2010 income tax forms real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. 2010 income tax forms You must treat the gain or loss as effectively connected with that trade or business. 2010 income tax forms U. 2010 income tax forms S. 2010 income tax forms real property interest. 2010 income tax forms   This is any interest in real property located in the United States or the U. 2010 income tax forms S. 2010 income tax forms Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. 2010 income tax forms S. 2010 income tax forms real property holding corporation. 2010 income tax forms Real property includes the following. 2010 income tax forms Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. 2010 income tax forms Improvements on land, including buildings, other permanent structures, and their structural components. 2010 income tax forms Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. 2010 income tax forms U. 2010 income tax forms S. 2010 income tax forms real property holding corporation. 2010 income tax forms   A corporation is a U. 2010 income tax forms S. 2010 income tax forms real property holding corporation if the fair market value of the corporation's U. 2010 income tax forms S. 2010 income tax forms real property interests are at least 50% of the total fair market value of: The corporation's U. 2010 income tax forms S. 2010 income tax forms real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. 2010 income tax forms   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business unless you establish that the corporation is not a U. 2010 income tax forms S. 2010 income tax forms real property holding corporation. 2010 income tax forms   A U. 2010 income tax forms S. 2010 income tax forms real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. 2010 income tax forms An interest in a foreign corporation owning U. 2010 income tax forms S. 2010 income tax forms real property generally is not a U. 2010 income tax forms S. 2010 income tax forms real property interest unless the corporation chooses to be treated as a domestic corporation. 2010 income tax forms Qualified investment entities. 2010 income tax forms   Special rules apply to qualified investment entities (QIEs). 2010 income tax forms A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. 2010 income tax forms S. 2010 income tax forms real property holding corporation. 2010 income tax forms    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest is treated as a U. 2010 income tax forms S. 2010 income tax forms real property gain by the shareholder receiving the distribution. 2010 income tax forms A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. 2010 income tax forms A distribution that you do not treat as gain from the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest is included in your gross income as a regular dividend. 2010 income tax forms Note. 2010 income tax forms Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. 2010 income tax forms S. 2010 income tax forms real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. 2010 income tax forms Domestically controlled QIE. 2010 income tax forms   The sale of an interest in a domestically controlled QIE is not the sale of a U. 2010 income tax forms S. 2010 income tax forms real property interest. 2010 income tax forms The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. 2010 income tax forms The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. 2010 income tax forms Wash sale. 2010 income tax forms    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. 2010 income tax forms An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. 2010 income tax forms If this occurs, you are treated as having gain from the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. 2010 income tax forms This also applies to any substitute dividend payment. 2010 income tax forms   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. 2010 income tax forms Alternative minimum tax. 2010 income tax forms   There may be a minimum tax on your net gain from the disposition of U. 2010 income tax forms S. 2010 income tax forms real property interests. 2010 income tax forms Figure the amount of this tax, if any, on Form 6251. 2010 income tax forms Withholding of tax. 2010 income tax forms   If you dispose of a U. 2010 income tax forms S. 2010 income tax forms real property interest, the buyer may have to withhold tax. 2010 income tax forms See the discussion of Tax Withheld on Real Property Sales in chapter 8. 2010 income tax forms Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2010 income tax forms An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2010 income tax forms The three kinds of foreign source income are listed below. 2010 income tax forms Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. 2010 income tax forms Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. 2010 income tax forms Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. 2010 income tax forms A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2010 income tax forms Income, gain, or loss from the sale outside the United States, through the U. 2010 income tax forms S. 2010 income tax forms office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2010 income tax forms Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. 2010 income tax forms Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms For example, foreign source interest and dividend equivalents are treated as U. 2010 income tax forms S. 2010 income tax forms effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. 2010 income tax forms Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. 2010 income tax forms S. 2010 income tax forms citizens and residents. 2010 income tax forms Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. 2010 income tax forms However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. 2010 income tax forms Example. 2010 income tax forms Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. 2010 income tax forms S. 2010 income tax forms office of his overseas employer. 2010 income tax forms He worked in the U. 2010 income tax forms S. 2010 income tax forms office until December 25, 2012, but did not leave this country until January 11, 2013. 2010 income tax forms On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. 2010 income tax forms All of Ted's income during his stay here is U. 2010 income tax forms S. 2010 income tax forms source income. 2010 income tax forms During 2012, Ted was engaged in the trade or business of performing personal services in the United States. 2010 income tax forms Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. 2010 income tax forms The salary payment Ted received in January 2013 is U. 2010 income tax forms S. 2010 income tax forms source income to him in 2013. 2010 income tax forms It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. 2010 income tax forms Real property income. 2010 income tax forms   You may be able to choose to treat all income from real property as effectively connected. 2010 income tax forms See Income From Real Property , later, in this chapter. 2010 income tax forms The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. 2010 income tax forms S. 2010 income tax forms sources but only if the items are not effectively connected with your U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. 2010 income tax forms S. 2010 income tax forms source fixed or determinable annual or periodic gains, profits, or income. 2010 income tax forms Income is fixed when it is paid in amounts known ahead of time. 2010 income tax forms Income is determinable whenever there is a basis for figuring the amount to be paid. 2010 income tax forms Income can be periodic if it is paid from time to time. 2010 income tax forms It does not have to be paid annually or at regular intervals. 2010 income tax forms Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. 2010 income tax forms Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. 2010 income tax forms A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2010 income tax forms Other items of income, such as royalties, also may be subject to the 30% tax. 2010 income tax forms Some fixed or determinable income may be exempt from U. 2010 income tax forms S. 2010 income tax forms tax. 2010 income tax forms See chapter 3 if you are not sure whether the income is taxable. 2010 income tax forms Original issue discount (OID). 2010 income tax forms   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. 2010 income tax forms The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. 2010 income tax forms The 30% tax applies in the following circumstances. 2010 income tax forms You received a payment on a debt instrument. 2010 income tax forms In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. 2010 income tax forms But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. 2010 income tax forms You sold or exchanged the debt instrument. 2010 income tax forms The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. 2010 income tax forms   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. 2010 income tax forms S. 2010 income tax forms Source Income Subject to Withholding, if you bought the debt instrument at original issue. 2010 income tax forms However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. 2010 income tax forms You bought the debt instrument at a premium or paid an acquisition premium. 2010 income tax forms The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. 2010 income tax forms S. 2010 income tax forms Treasury securities). 2010 income tax forms The debt instrument is a contingent payment or inflation-indexed debt instrument. 2010 income tax forms For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. 2010 income tax forms   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. 2010 income tax forms See chapter 12. 2010 income tax forms Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business and is not exempted by treaty. 2010 income tax forms However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. 2010 income tax forms Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms Social Security Benefits A nonresident alien must include 85% of any U. 2010 income tax forms S. 2010 income tax forms social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. 2010 income tax forms S. 2010 income tax forms source fixed or determinable annual or periodic income. 2010 income tax forms Social security benefits include monthly retirement, survivor, and disability benefits. 2010 income tax forms This income is exempt under some tax treaties. 2010 income tax forms See Table 1 in Publication 901, U. 2010 income tax forms S. 2010 income tax forms Tax Treaties, for a list of tax treaties that exempt U. 2010 income tax forms S. 2010 income tax forms social security benefits from U. 2010 income tax forms S. 2010 income tax forms tax. 2010 income tax forms Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. 2010 income tax forms They apply even if you are engaged in a trade or business in the United States. 2010 income tax forms These rules do not apply to the sale or exchange of a U. 2010 income tax forms S. 2010 income tax forms real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. 2010 income tax forms See Real Property Gain or Loss , earlier, under Effectively Connected Income. 2010 income tax forms A capital asset is everything you own except: Inventory. 2010 income tax forms Business accounts or notes receivable. 2010 income tax forms Depreciable property used in a trade or business. 2010 income tax forms Real property used in a trade or business. 2010 income tax forms Supplies regularly used in a trade or business. 2010 income tax forms Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. 2010 income tax forms Certain U. 2010 income tax forms S. 2010 income tax forms government publications. 2010 income tax forms Certain commodities derivative financial instruments held by a commodities derivatives dealer. 2010 income tax forms Hedging transactions. 2010 income tax forms A capital gain is a gain on the sale or exchange of a capital asset. 2010 income tax forms A capital loss is a loss on the sale or exchange of a capital asset. 2010 income tax forms If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. 2010 income tax forms S. 2010 income tax forms currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. 2010 income tax forms You may want to read Publication 544. 2010 income tax forms However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. 2010 income tax forms Specific tax treatment that applies to U. 2010 income tax forms S. 2010 income tax forms citizens or residents generally does not apply to you. 2010 income tax forms The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. 2010 income tax forms Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. 2010 income tax forms Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. 2010 income tax forms Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. 2010 income tax forms Gains on the sale or exchange of original issue discount obligations. 2010 income tax forms Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms See Income From Real Property , later. 2010 income tax forms 183-day rule. 2010 income tax forms   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. 2010 income tax forms For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. 2010 income tax forms S. 2010 income tax forms sources over your capital losses from U. 2010 income tax forms S. 2010 income tax forms sources. 2010 income tax forms This rule applies even if any of the transactions occurred while you were not in the United States. 2010 income tax forms   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. 2010 income tax forms S. 2010 income tax forms trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. 2010 income tax forms   In arriving at your net gain, do not take the following into consideration. 2010 income tax forms The four types of gains listed earlier. 2010 income tax forms The deduction for a capital loss carryover. 2010 income tax forms Capital losses in excess of capital gains. 2010 income tax forms Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). 2010 income tax forms Losses from the sale or exchange of property held for personal use. 2010 income tax forms However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). 2010 income tax forms See Itemized Deductions in chapter 5. 2010 income tax forms   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. 2010 income tax forms Also, you must file your tax return on a calendar-year basis. 2010 income tax forms   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. 2010 income tax forms Reporting. 2010 income tax forms   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. 2010 income tax forms Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. 2010 income tax forms Attach them to Form 1040NR. 2010 income tax forms Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. 2010 income tax forms The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. 2010 income tax forms This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. 2010 income tax forms It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. 2010 income tax forms You can make this choice only for real property income that is not otherwise effectively connected with your U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. 2010 income tax forms This choice does not treat a nonresident alien, who is not otherwise engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business, as being engaged in a trade or business in the United States during the year. 2010 income tax forms Example. 2010 income tax forms You are a nonresident alien and are not engaged in a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms You own a single-family house in the United States that you rent out. 2010 income tax forms Your rental income for the year is $10,000. 2010 income tax forms This is your only U. 2010 income tax forms S. 2010 income tax forms source income. 2010 income tax forms As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. 2010 income tax forms You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. 2010 income tax forms You do not have to file a U. 2010 income tax forms S. 2010 income tax forms tax return (Form 1040NR) because your U. 2010 income tax forms S. 2010 income tax forms tax liability is satisfied by the withholding of tax. 2010 income tax forms If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. 2010 income tax forms (See Publication 527, Residential Rental Property, for information on rental expenses. 2010 income tax forms ) Any resulting net income is taxed at graduated rates. 2010 income tax forms If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. 2010 income tax forms For the first year you make the choice, also attach the statement discussed next. 2010 income tax forms Making the choice. 2010 income tax forms   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. 2010 income tax forms Include the following in your statement. 2010 income tax forms That you are making the choice. 2010 income tax forms Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. 2010 income tax forms A complete list of all your real property, or any interest in real property, located in the United States. 2010 income tax forms Give the legal identification of U. 2010 income tax forms S. 2010 income tax forms timber, coal, or iron ore in which you have an interest. 2010 income tax forms The extent of your ownership in the property. 2010 income tax forms The location of the property. 2010 income tax forms A description of any major improvements to the property. 2010 income tax forms The dates you owned the property. 2010 income tax forms Your income from the property. 2010 income tax forms Details of any previous choices and revocations of the real property income choice. 2010 income tax forms   This choice stays in effect for all later tax years unless you revoke it. 2010 income tax forms Revoking the choice. 2010 income tax forms   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. 2010 income tax forms S. 2010 income tax forms Individual Income Tax Return, for the year you made the choice and for later tax years. 2010 income tax forms You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. 2010 income tax forms If this time period has expired for the year of choice, you cannot revoke the choice for that year. 2010 income tax forms However, you may revoke the choice for later tax years only if you have IRS approval. 2010 income tax forms For information on how to get IRS approval, see Regulation section 1. 2010 income tax forms 871-10(d)(2). 2010 income tax forms Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . 2010 income tax forms If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. 2010 income tax forms Attach a statement to your return that includes the following information (if applicable). 2010 income tax forms Your name, taxpayer identification number, and tax year. 2010 income tax forms A description of the types of services performed (whether on or off board). 2010 income tax forms Names of vessels or registration numbers of aircraft on which you performed the services. 2010 income tax forms Amount of U. 2010 income tax forms S. 2010 income tax forms source transportation income derived from each type of service for each vessel or aircraft for the calendar year. 2010 income tax forms Total amount of U. 2010 income tax forms S. 2010 income tax forms source transportation income derived from all types of services for the calendar year. 2010 income tax forms This 4% tax applies to your U. 2010 income tax forms S. 2010 income tax forms source gross transportation income. 2010 income tax forms This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. 2010 income tax forms For transportation income from personal services, the transportation must be between the United States and a U. 2010 income tax forms S. 2010 income tax forms possession. 2010 income tax forms For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. 2010 income tax forms Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. 2010 income tax forms S. 2010 income tax forms residence with a period of nonresidence. 2010 income tax forms The special rule applies if you meet all of the following conditions. 2010 income tax forms You were a U. 2010 income tax forms S. 2010 income tax forms resident for a period that includes at least 3 consecutive calendar years. 2010 income tax forms You were a U. 2010 income tax forms S. 2010 income tax forms resident for at least 183 days in each of those years. 2010 income tax forms You ceased to be treated as a U. 2010 income tax forms S. 2010 income tax forms resident. 2010 income tax forms You then again became a U. 2010 income tax forms S. 2010 income tax forms resident before the end of the third calendar year after the end of the period described in (1) above. 2010 income tax forms Under this special rule, you are subject to tax on your U. 2010 income tax forms S. 2010 income tax forms source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. 2010 income tax forms Example. 2010 income tax forms John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. 2010 income tax forms On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. 2010 income tax forms During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). 2010 income tax forms He returned to the United States on October 5, 2013, as a lawful permanent resident. 2010 income tax forms He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). 2010 income tax forms Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. 2010 income tax forms Reporting requirements. 2010 income tax forms   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. 2010 income tax forms The return is due by the due date (including extensions) for filing your U. 2010 income tax forms S. 2010 income tax forms income tax return for the year that you again become a U. 2010 income tax forms S. 2010 income tax forms resident. 2010 income tax forms If you already filed returns for that period, you must file amended returns. 2010 income tax forms You must attach a statement to your return that identifies the source of all of your U. 2010 income tax forms S. 2010 income tax forms and foreign gross income and the items of income subject to this special rule. 2010 income tax forms Expatriation Tax The expatriation tax provisions apply to U. 2010 income tax forms S. 2010 income tax forms citizens who have renounced their citizenship and long-term residents who have ended their residency. 2010 income tax forms The rules that apply are based on the dates of expatriation, which are described in the following sections. 2010 income tax forms Expatriation Before June 4, 2004. 2010 income tax forms Expatriation After June 3, 2004, and Before June 17, 2008. 2010 income tax forms Expatriation After June 16, 2008. 2010 income tax forms Long-term resident defined. 2010 income tax forms   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. 2010 income tax forms In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. 2010 income tax forms Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. 2010 income tax forms S. 2010 income tax forms taxes. 2010 income tax forms Unless you received a ruling from the IRS that you did not expatriate to avoid U. 2010 income tax forms S. 2010 income tax forms taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. 2010 income tax forms The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). 2010 income tax forms Table 4-1. 2010 income tax forms Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . 2010 income tax forms . 2010 income tax forms . 2010 income tax forms   THEN the rules outlined on this page apply if . 2010 income tax forms . 2010 income tax forms . 2010 income tax forms     Your 5-year average annual net income tax was more than . 2010 income tax forms . 2010 income tax forms . 2010 income tax forms OR Your net worth equaled or exceeded . 2010 income tax forms . 2010 income tax forms . 2010 income tax forms 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. 2010 income tax forms Reporting requirements. 2010 income tax forms   If you lost your U. 2010 income tax forms S. 2010 income tax forms citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. 2010 income tax forms If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. 2010 income tax forms   Your U. 2010 income tax forms S. 2010 income tax forms residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. 2010 income tax forms Penalties. 2010 income tax forms   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. 2010 income tax forms The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. 2010 income tax forms The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. 2010 income tax forms Expatriation tax. 2010 income tax forms   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. 2010 income tax forms It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. 2010 income tax forms See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. 2010 income tax forms Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. 2010 income tax forms Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. 2010 income tax forms $127,000 if you expatriated or terminated residency in 2005. 2010 income tax forms $131,000 if you expatriated or terminated residency in 2006. 2010 income tax forms $136,000 if you expatriated or terminated residency in 2007. 2010 income tax forms $139,000 if you expatriated or terminated residency in 2008. 2010 income tax forms Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2010 income tax forms You fail to certify on Form 8854 that you have complied with all U. 2010 income tax forms S. 2010 income tax forms federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. 2010 income tax forms Exception for dual-citizens and certain minors. 2010 income tax forms   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. 2010 income tax forms However, they still must provide the certification required in (3). 2010 income tax forms Certain dual-citizens. 2010 income tax forms   You may qualify for the exception described above if all of the following apply. 2010 income tax forms You became at birth a U. 2010 income tax forms S. 2010 income tax forms citizen and a citizen of another country and you continue to be a citizen of that other country. 2010 income tax forms You were never a resident alien of the United States (as defined in chapter 1). 2010 income tax forms You never held a U. 2010 income tax forms S. 2010 income tax forms passport. 2010 income tax forms You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. 2010 income tax forms S. 2010 income tax forms citizenship. 2010 income tax forms Certain minors. 2010 income tax forms   You may qualify for the exception described above if you meet all of the following requirements. 2010 income tax forms You became a U. 2010 income tax forms S. 2010 income tax forms citizen at birth. 2010 income tax forms Neither of your parents was a U. 2010 income tax forms S. 2010 income tax forms citizen at the time of your birth. 2010 income tax forms You expatriated before you were 18½. 2010 income tax forms You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. 2010 income tax forms Tax consequences of presence in the United States. 2010 income tax forms   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. 2010 income tax forms   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. 2010 income tax forms Instead, you are treated as a U. 2010 income tax forms S. 2010 income tax forms citizen or resident and taxed on your worldwide income for that tax year. 2010 income tax forms You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. 2010 income tax forms   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. 2010 income tax forms However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. 2010 income tax forms You have ties with other countries. 2010 income tax forms You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. 2010 income tax forms You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. 2010 income tax forms Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. 2010 income tax forms See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. 2010 income tax forms Related employer. 2010 income tax forms   If your employer in the United States is any of the following, then your employer is related to you. 2010 income tax forms You must count any days you performed services in the United States for that employer as days of presence in the United States. 2010 income tax forms Members of your family. 2010 income tax forms This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2010 income tax forms ), and lineal descendants (children, grandchildren, etc. 2010 income tax forms ). 2010 income tax forms A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2010 income tax forms A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2010 income tax forms (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. 2010 income tax forms ) A tax-exempt charitable or educational organization that is 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. 2010 income tax forms Date of tax expatriation. 2010 income tax forms   For purposes of U. 2010 income tax forms S. 2010 income tax forms tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. 2010 income tax forms You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. 2010 income tax forms You file Form 8854 in accordance with the form instructions. 2010 income tax forms Annual return. 2010 income tax forms   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. 2010 income tax forms You must file this form even if you owe no U. 2010 income tax forms S. 2010 income tax forms tax. 2010 income tax forms Penalty. 2010 income tax forms   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. 2010 income tax forms You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. 2010 income tax forms How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. 2010 income tax forms S. 2010 income tax forms source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2010 income tax forms S. 2010 income tax forms trade or business. 2010 income tax forms For this purpose, U. 2010 income tax forms S. 2010 income tax forms source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. 2010 income tax forms S. 2010 income tax forms domestic corporation, and Debt obligations of U. 2010 income tax forms S. 2010 income tax forms persons or of the United States, a state or political subdivision thereof, or the District of Columbia. 2010 income tax forms U. 2010 income tax forms S. 2010 income tax forms source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. 2010 income tax forms The income or gain is considered U. 2010 income tax forms S. 2010 income tax forms source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. 2010 income tax forms Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. 2010 income tax forms S. 2010 income tax forms source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. 2010 income tax forms Other information. 2010 income tax forms   For more information on the expatriation tax provisions, including exceptions to the tax and special U. 2010 income tax forms S. 2010 income tax forms source rules, see section 877 of the Internal Revenue Code. 2010 income tax forms Expatriation Tax Return If you expatriated or terminated your U. 2010 income tax forms S. 2010 income tax forms residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. 2010 income tax forms Attach it to Form 1040NR if you are required to file that form. 2010 income tax forms If you are present in the United States following your expatriation and are subject to tax as a U. 2010 income tax forms S. 2010 income tax forms citizen or resident, file Form 8854 with Form 1040. 2010 income tax forms Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. 2010 income tax forms Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. 2010 income tax forms $145,000 if you expatriated or terminated residency in 2009 or 2010. 2010 income tax forms $147,000 if you expatriated or terminated residency in 2011. 2010 income tax forms $151,000 if you expatriated or terminated residency in 2012. 2010 income tax forms $155,000 if you expatriated or terminated residency in 2013. 2010 income tax forms Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2010 income tax forms You fail to certify on Form 8854 that you have complied with all U. 2010 income tax forms S. 2010 income tax forms federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. 2010 income tax forms Exception for dual-citizens and certain minors. 2010 income tax forms   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. 2010 income tax forms However, they still must provide the certification required in (3) above. 2010 income tax forms Certain dual-citizens. 2010 income tax forms   You may qualify for the exception described above if both of the following apply. 2010 income tax forms You became at birth a U. 2010 income tax forms S. 2010 income tax forms citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. 2010 income tax forms You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. 2010 income tax forms For the purpose of determining U. 2010 income tax forms S. 2010 income tax forms residency, use the substantial presence test described in chapter 1. 2010 income tax forms Certain minors. 2010 income tax forms   You may qualify for the exception described earlier if you meet both of the following requirements. 2010 income tax forms You expatriated before you were 18½. 2010 income tax forms You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. 2010 income tax forms For the purpose of determining U. 2010 income tax forms S. 2010 income tax forms residency, use the substantial presence test described in chapter 1. 2010 income tax forms Expatriation date. 2010 income tax forms   Your expatriation date is the date you relinquish U. 2010 income tax forms S. 2010 income tax forms citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. 2010 income tax forms S. 2010 income tax forms resident). 2010 income tax forms Former U. 2010 income tax forms S. 2010 income tax forms citizen. 2010 income tax forms   You are considered to have relinquished your U. 2010 income tax forms S. 2010 income tax forms citizenship on the earliest of the following dates. 2010 income tax forms The date you renounced U. 2010 income tax forms S. 2010 income tax forms citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). 2010 income tax forms The date you furnished to the State Department a signed statement of voluntary relinquishment of U. 2010 income tax forms S. 2010 income tax forms nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). 2010 income tax forms The date the State Department issued a certificate of loss of nationality. 2010 income tax forms The date that a U. 2010 income tax forms S. 2010 income tax forms court canceled your certificate of naturalization. 2010 income tax forms Former long-term resident. 2010 income tax forms   You are considered to have terminated your long-term residency on the earliest of the following dates. 2010 income tax forms The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. 2010 income tax forms S. 2010 income tax forms consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. 2010 income tax forms The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. 2010 income tax forms If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. 2010 income tax forms See Effect of Tax Treaties in chapter 1 for more information about dual residents. 2010 income tax forms How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). 2010 income tax forms This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. 2010 income tax forms But see Exceptions , later. 2010 income tax forms Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. 2010 income tax forms S. 2010 income tax forms internal revenue laws. 2010 income tax forms Losses from deemed sales must be taken into account to the extent otherwise provided under U. 2010 income tax forms S. 2010 income tax forms internal revenue laws. 2010 income tax forms However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. 2010 income tax forms The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. 2010 income tax forms $626,000 if you expatriated or terminated residency in 2009. 2010 income tax forms $627,000 if you expatriated or terminated residency in 2010. 2010 income tax forms $636,000 if you expatriated or terminated residency in 2011. 2010 income tax forms $651,000 if you expatriated or terminated residency in 2012. 2010 income tax forms $668,000 if you expatriated or terminated residency in 2013. 2010 income tax forms Exceptions. 2010 income tax forms   The mark-to-market tax does not apply to the following. 2010 income tax forms Eligible deferred compensation items. 2010 income tax forms Ineligible deferred compensation items. 2010 income tax forms Interests in nongrantor trusts. 2010 income tax forms Specified tax deferred accounts. 2010 income tax forms Instead, items (1) and (3) may be subject to withholding at source. 2010 income tax forms In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. 2010 income tax forms In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. 2010 income tax forms See paragraphs (d), (e), and (f) of section 877A for more information. 2010 income tax forms Expatriation Tax Return If you expatriated or terminated your U. 2010 income tax forms S. 2010 income tax forms residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. 2010 income tax forms Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. 2010 income tax forms Deferral of payment of mark-to-market tax. 2010 income tax forms   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. 2010 income tax forms If you make this election, the following rules apply. 2010 income tax forms You can make the election on a property-by-property basis. 2010 income tax forms The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. 2010 income tax forms Interest is charged for the period the tax is deferred. 2010 income tax forms The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. 2010 income tax forms The due date of the return required for the year of death. 2010 income tax forms The time that the security provided for the property fails to be adequate. 2010 income tax forms See item (6) below. 2010 income tax forms You make the election on Form 8854. 2010 income tax forms You must provide adequate security (such as a bond). 2010 income tax forms You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. 2010 income tax forms   For more information about the deferral of payment, see the Instructions for Form 8854. 2010 income tax forms Prev  Up  Next   Home   More Online Publications