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2012 Income Tax Booklet

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2012 Income Tax Booklet

2012 income tax booklet Publication 523 - Main Content Table of Contents Main HomeVacant land. 2012 income tax booklet Factors used to determine main home. 2012 income tax booklet Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. 2012 income tax booklet Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. 2012 income tax booklet Individual taxpayer identification number (ITIN). 2012 income tax booklet More information. 2012 income tax booklet Comprehensive Examples Special SituationsException for sales to related persons. 2012 income tax booklet Deducting Taxes in the Year of SaleForm 1099-S. 2012 income tax booklet More information. 2012 income tax booklet Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. 2012 income tax booklet Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. 2012 income tax booklet ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 2012 income tax booklet To exclude gain under the rules in this publication, you in most cases 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 of sale. 2012 income tax booklet Land. 2012 income tax booklet   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. 2012 income tax booklet Example. 2012 income tax booklet You buy a piece of land and move your main home to it. 2012 income tax booklet Then, you sell the land on which your main home was located. 2012 income tax booklet This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. 2012 income tax booklet Vacant land. 2012 income tax booklet   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. 2012 income tax booklet If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. 2012 income tax booklet See Excluding the Gain , later. 2012 income tax booklet The destruction of your home is treated as a sale of your home. 2012 income tax booklet As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. 2012 income tax booklet For information, see Publication 547. 2012 income tax booklet More than one home. 2012 income tax booklet   If you have more than one home, you can exclude gain only from the sale of your main home. 2012 income tax booklet You must include in income the gain from the sale of any other home. 2012 income tax booklet If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. 2012 income tax booklet Example 1. 2012 income tax booklet You own two homes, one in New York and one in Florida. 2012 income tax booklet From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. 2012 income tax booklet In the absence of facts and circumstances indicating otherwise, the New York home is your main home. 2012 income tax booklet You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. 2012 income tax booklet Example 2. 2012 income tax booklet You own a house, but you live in another house that you rent. 2012 income tax booklet The rented house is your main home. 2012 income tax booklet Example 3. 2012 income tax booklet You own two homes, one in Virginia and one in New Hampshire. 2012 income tax booklet In 2009 and 2010, you lived in the Virginia home. 2012 income tax booklet In 2011 and 2012, you lived in the New Hampshire home. 2012 income tax booklet In 2013, you lived again in the Virginia home. 2012 income tax booklet Your main home in 2009, 2010, and 2013 is the Virginia home. 2012 income tax booklet Your main home in 2011 and 2012 is the New Hampshire home. 2012 income tax booklet You would be eligible to exclude gain from the sale of either home (but not both) in 2013. 2012 income tax booklet Factors used to determine main home. 2012 income tax booklet   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. 2012 income tax booklet Those factors include the following. 2012 income tax booklet Your place of employment. 2012 income tax booklet The location of your family members' main home. 2012 income tax booklet Your mailing address for bills and correspondence. 2012 income tax booklet The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. 2012 income tax booklet The location of the banks you use. 2012 income tax booklet The location of recreational clubs and religious organizations of which you are a member. 2012 income tax booklet Property used partly as your main home. 2012 income tax booklet   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. 2012 income tax booklet For details, see Business Use or Rental of Home , later. 2012 income tax booklet Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. 2012 income tax booklet Subtract the adjusted basis from the amount realized to get your gain or loss. 2012 income tax booklet     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. 2012 income tax booklet   Gain is the excess of the amount realized over the adjusted basis of the property. 2012 income tax booklet Loss. 2012 income tax booklet   Loss is the excess of the adjusted basis over the amount realized for the property. 2012 income tax booklet Selling Price The selling price is the total amount you receive for your home. 2012 income tax booklet It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. 2012 income tax booklet Personal property. 2012 income tax booklet   The selling price of your home does not include amounts you received for personal property sold with your home. 2012 income tax booklet Personal property is property that is not a permanent part of the home. 2012 income tax booklet Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. 2012 income tax booklet Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). 2012 income tax booklet Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. 2012 income tax booklet Payment by employer. 2012 income tax booklet   You may have to sell your home because of a job transfer. 2012 income tax booklet If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. 2012 income tax booklet Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. 2012 income tax booklet Option to buy. 2012 income tax booklet   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. 2012 income tax booklet If the option is not exercised, you must report the amount as ordinary income in the year the option expires. 2012 income tax booklet Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. 2012 income tax booklet Form 1099-S. 2012 income tax booklet   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. 2012 income tax booklet   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. 2012 income tax booklet Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. 2012 income tax booklet Amount Realized The amount realized is the selling price minus selling expenses. 2012 income tax booklet Selling expenses. 2012 income tax booklet   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. 2012 income tax booklet ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. 2012 income tax booklet This adjusted basis must be determined before you can figure gain or loss on the sale of your home. 2012 income tax booklet For information on how to figure your home's adjusted basis, see Determining Basis , later. 2012 income tax booklet Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. 2012 income tax booklet Gain on sale. 2012 income tax booklet   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. 2012 income tax booklet Loss on sale. 2012 income tax booklet   If the amount realized is less than the adjusted basis, the difference is a loss. 2012 income tax booklet Generally, a loss on the sale of your main home cannot be deducted. 2012 income tax booklet Jointly owned home. 2012 income tax booklet   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. 2012 income tax booklet Separate returns. 2012 income tax booklet   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. 2012 income tax booklet Your ownership interest is generally determined by state law. 2012 income tax booklet Joint owners not married. 2012 income tax booklet   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. 2012 income tax booklet Each of you applies the rules discussed in this publication on an individual basis. 2012 income tax booklet Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. 2012 income tax booklet Foreclosure or repossession. 2012 income tax booklet   If your home was foreclosed on or repossessed, you have a disposition. 2012 income tax booklet See Publication 4681 to determine if you have ordinary income, gain, or loss. 2012 income tax booklet More information. 2012 income tax booklet   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. 2012 income tax booklet Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. 2012 income tax booklet Abandonment. 2012 income tax booklet   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. 2012 income tax booklet Trading (exchanging) homes. 2012 income tax booklet   If you trade your home for another home, treat the trade as a sale and a purchase. 2012 income tax booklet Example. 2012 income tax booklet You owned and lived in a home with an adjusted basis of $41,000. 2012 income tax booklet A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. 2012 income tax booklet This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). 2012 income tax booklet If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). 2012 income tax booklet Transfer to spouse. 2012 income tax booklet   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). 2012 income tax booklet This is true even if you receive cash or other consideration for the home. 2012 income tax booklet As a result, the rules explained in this publication do not apply. 2012 income tax booklet   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. 2012 income tax booklet You have no gain or loss. 2012 income tax booklet Exception. 2012 income tax booklet   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. 2012 income tax booklet In that case, you generally will have a gain or loss. 2012 income tax booklet More information. 2012 income tax booklet    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. 2012 income tax booklet Involuntary conversion. 2012 income tax booklet   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. 2012 income tax booklet This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). 2012 income tax booklet Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. 2012 income tax booklet Your basis in your home is determined by how you got the home. 2012 income tax booklet Generally, your basis is its cost if you bought it or built it. 2012 income tax booklet If you got it in some other way (inheritance, gift, etc. 2012 income tax booklet ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. 2012 income tax booklet While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. 2012 income tax booklet The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. 2012 income tax booklet To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. 2012 income tax booklet Filled-in examples of that worksheet are included in the Comprehensive Examples , later. 2012 income tax booklet Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. 2012 income tax booklet Purchase. 2012 income tax booklet   If you bought your home, your basis is its cost to you. 2012 income tax booklet This includes the purchase price and certain settlement or closing costs. 2012 income tax booklet In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. 2012 income tax booklet If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. 2012 income tax booklet Seller-paid points. 2012 income tax booklet   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. 2012 income tax booklet    IF you bought your home. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet THEN reduce your home's basis by the seller-paid points. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. 2012 income tax booklet after April 3, 1994 even if you did not deduct them. 2012 income tax booklet Settlement fees or closing costs. 2012 income tax booklet   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 2012 income tax booklet You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. 2012 income tax booklet A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). 2012 income tax booklet   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 2012 income tax booklet   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. 2012 income tax booklet   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. 2012 income tax booklet Real estate taxes. 2012 income tax booklet   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. 2012 income tax booklet    IF. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet AND. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet THEN the taxes. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. 2012 income tax booklet the seller reimburses you do not affect the basis of your home. 2012 income tax booklet the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. 2012 income tax booklet you reimburse the seller do not affect the basis of your home. 2012 income tax booklet Construction. 2012 income tax booklet   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. 2012 income tax booklet   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. 2012 income tax booklet It also includes certain settlement or closing costs. 2012 income tax booklet You may have to reduce your basis by points the seller paid for you. 2012 income tax booklet For more information, see Seller-paid points and Settlement fees or closing costs , earlier. 2012 income tax booklet Built by you. 2012 income tax booklet   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. 2012 income tax booklet Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. 2012 income tax booklet Temporary housing. 2012 income tax booklet   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. 2012 income tax booklet To figure the amount of the reduction, multiply the contract price by a fraction. 2012 income tax booklet The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. 2012 income tax booklet Cooperative apartment. 2012 income tax booklet   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. 2012 income tax booklet This may include your share of a mortgage on the apartment building. 2012 income tax booklet Condominium. 2012 income tax booklet   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. 2012 income tax booklet Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. 2012 income tax booklet These situations are discussed in the following pages. 2012 income tax booklet Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. 2012 income tax booklet Other special rules may apply in certain situations. 2012 income tax booklet If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. 2012 income tax booklet Home received as gift. 2012 income tax booklet   Use the following chart to find the basis of a home you received as a gift. 2012 income tax booklet IF the donor's adjusted basis at the time of the gift was. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet THEN your basis is. 2012 income tax booklet . 2012 income tax booklet . 2012 income tax booklet more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. 2012 income tax booklet   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. 2012 income tax booklet If using the fair market value results in a gain, you have neither gain nor loss. 2012 income tax booklet equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. 2012 income tax booklet equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). 2012 income tax booklet Fair market value. 2012 income tax booklet   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. 2012 income tax booklet If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. 2012 income tax booklet Part of federal gift tax due to net increase in value. 2012 income tax booklet   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 2012 income tax booklet The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 2012 income tax booklet The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. 2012 income tax booklet Home acquired from a decedent who died before or after 2010. 2012 income tax booklet   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). 2012 income tax booklet If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. 2012 income tax booklet If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. 2012 income tax booklet Surviving spouse. 2012 income tax booklet   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. 2012 income tax booklet The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). 2012 income tax booklet The basis in your interest will remain the same. 2012 income tax booklet Your new basis in the home is the total of these two amounts. 2012 income tax booklet   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. 2012 income tax booklet Example. 2012 income tax booklet Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. 2012 income tax booklet Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). 2012 income tax booklet Community property. 2012 income tax booklet   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. 2012 income tax booklet When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. 2012 income tax booklet For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. 2012 income tax booklet   For more information about community property, see Publication 555, Community Property. 2012 income tax booklet    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. 2012 income tax booklet Home received as trade. 2012 income tax booklet   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. 2012 income tax booklet If you traded one home for another, you have made a sale and purchase. 2012 income tax booklet In that case, you may have a gain. 2012 income tax booklet See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. 2012 income tax booklet Home received from spouse. 2012 income tax booklet   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. 2012 income tax booklet Transfers after July 18, 1984. 2012 income tax booklet   If you received the home after July 18, 1984, there was no gain or loss on the transfer. 2012 income tax booklet In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. 2012 income tax booklet This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. 2012 income tax booklet   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. 2012 income tax booklet This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. 2012 income tax booklet Your basis in the half interest you already owned does not change. 2012 income tax booklet Your new basis in the home is the total of these two amounts. 2012 income tax booklet Transfers before July 19, 1984. 2012 income tax booklet   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. 2012 income tax booklet More information. 2012 income tax booklet   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. 2012 income tax booklet Involuntary conversion. 2012 income tax booklet   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. 2012 income tax booklet If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. 2012 income tax booklet Example. 2012 income tax booklet A fire destroyed your home that you owned and used for only 6 months. 2012 income tax booklet The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. 2012 income tax booklet Your gain is $50,000 ($130,000 − $80,000). 2012 income tax booklet You bought a replacement home for $100,000. 2012 income tax booklet The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. 2012 income tax booklet The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. 2012 income tax booklet The basis of the new home is figured as follows. 2012 income tax booklet Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. 2012 income tax booklet   For more information about basis, see Publication 551. 2012 income tax booklet Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. 2012 income tax booklet To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. 2012 income tax booklet Filled-in examples of that worksheet are included in Comprehensive Examples , later. 2012 income tax booklet Recordkeeping. 2012 income tax booklet You should keep records to prove your home's adjusted basis. 2012 income tax booklet Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. 2012 income tax booklet But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. 2012 income tax booklet Keep records proving the basis of both homes as long as they are needed for tax purposes. 2012 income tax booklet The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. 2012 income tax booklet Increases to Basis These include the following. 2012 income tax booklet Additions and other improvements that have a useful life of more than 1 year. 2012 income tax booklet Special assessments for local improvements. 2012 income tax booklet Amounts you spent after a casualty to restore damaged property. 2012 income tax booklet Improvements. 2012 income tax booklet   These add to the value of your home, prolong its useful life, or adapt it to new uses. 2012 income tax booklet You add the cost of additions and other improvements to the basis of your property. 2012 income tax booklet   The following chart lists some other examples of improvements. 2012 income tax booklet Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. 2012 income tax booklet   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 2012 income tax booklet Example. 2012 income tax booklet You put wall-to-wall carpeting in your home 15 years ago. 2012 income tax booklet Later, you replaced that carpeting with new wall-to-wall carpeting. 2012 income tax booklet The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 2012 income tax booklet Repairs. 2012 income tax booklet   These maintain your home in good condition but do not add to its value or prolong its life. 2012 income tax booklet You do not add their cost to the basis of your property. 2012 income tax booklet Examples. 2012 income tax booklet Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. 2012 income tax booklet Exception. 2012 income tax booklet   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. 2012 income tax booklet For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. 2012 income tax booklet Decreases to Basis These include the following. 2012 income tax booklet Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). 2012 income tax booklet For details, see Publication 4681. 2012 income tax booklet Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. 2012 income tax booklet For details, see Publication 4681. 2012 income tax booklet Gain you postponed from the sale of a previous home before May 7, 1997. 2012 income tax booklet Deductible casualty losses. 2012 income tax booklet Insurance payments you received or expect to receive for casualty losses. 2012 income tax booklet Payments you received for granting an easement or right-of-way. 2012 income tax booklet Depreciation allowed or allowable if you used your home for business or rental purposes. 2012 income tax booklet Energy-related credits allowed for expenditures made on the residence. 2012 income tax booklet (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. 2012 income tax booklet ) Adoption credit you claimed for improvements added to the basis of your home. 2012 income tax booklet Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. 2012 income tax booklet Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. 2012 income tax booklet An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. 2012 income tax booklet District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. 2012 income tax booklet General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. 2012 income tax booklet Discharges of qualified principal residence indebtedness. 2012 income tax booklet   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. 2012 income tax booklet This exclusion applies to discharges made after 2006 and before 2014. 2012 income tax booklet If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. 2012 income tax booklet   File Form 982 with your tax return. 2012 income tax booklet See the form's instructions for detailed information. 2012 income tax booklet    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. 2012 income tax booklet In most cases, this would occur in a refinancing or a restructuring of the mortgage. 2012 income tax booklet Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. 2012 income tax booklet This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. 2012 income tax booklet To qualify, you must meet the ownership and use tests described later. 2012 income tax booklet You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. 2012 income tax booklet This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. 2012 income tax booklet You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. 2012 income tax booklet If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. 2012 income tax booklet See Publication 505, Tax Withholding and Estimated Tax. 2012 income tax booklet Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. 2012 income tax booklet You meet the ownership test. 2012 income tax booklet You meet the use test. 2012 income tax booklet During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 2012 income tax booklet For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. 2012 income tax booklet If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. 2012 income tax booklet You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . 2012 income tax booklet Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 2012 income tax booklet This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). 2012 income tax booklet Exception. 2012 income tax booklet   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. 2012 income tax booklet However, the maximum amount you may be able to exclude will be reduced. 2012 income tax booklet See Reduced Maximum Exclusion , later. 2012 income tax booklet Example 1—home owned and occupied for at least 2 years. 2012 income tax booklet Mya bought and moved into her main home in September 2011. 2012 income tax booklet She sold the home at a gain in October 2013. 2012 income tax booklet During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. 2012 income tax booklet She meets the ownership and use tests. 2012 income tax booklet Example 2—ownership test met but use test not met. 2012 income tax booklet Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. 2012 income tax booklet He later sold the home for a gain in June 2013. 2012 income tax booklet He owned the home during the entire 5-year period ending on the date of sale. 2012 income tax booklet He meets the ownership test but not the use test. 2012 income tax booklet He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). 2012 income tax booklet Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. 2012 income tax booklet You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. 2012 income tax booklet Example. 2012 income tax booklet Naomi bought and moved into a house in July 2009. 2012 income tax booklet She lived there for 13 months and then moved in with a friend. 2012 income tax booklet She later moved back into her house and lived there for 12 months until she sold it in August 2013. 2012 income tax booklet Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. 2012 income tax booklet Temporary absence. 2012 income tax booklet   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. 2012 income tax booklet The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. 2012 income tax booklet Example 1. 2012 income tax booklet David Johnson, who is single, bought and moved into his home on February 1, 2011. 2012 income tax booklet Each year during 2011 and 2012, David left his home for a 2-month summer vacation. 2012 income tax booklet David sold the house on March 1, 2013. 2012 income tax booklet Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. 2012 income tax booklet The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. 2012 income tax booklet Example 2. 2012 income tax booklet Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. 2012 income tax booklet Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. 2012 income tax booklet He cannot exclude any part of his gain because he did not use the residence for the required 2 years. 2012 income tax booklet Ownership and use tests met at different times. 2012 income tax booklet   You can meet the ownership and use tests during different 2-year periods. 2012 income tax booklet However, you must meet both tests during the 5-year period ending on the date of the sale. 2012 income tax booklet Example. 2012 income tax booklet Beginning in 2002, Helen Jones lived in a rented apartment. 2012 income tax booklet The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. 2012 income tax booklet In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. 2012 income tax booklet On July 12, 2013, while still living in her daughter's home, she sold her condominium. 2012 income tax booklet Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. 2012 income tax booklet She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). 2012 income tax booklet She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). 2012 income tax booklet The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. 2012 income tax booklet Cooperative apartment. 2012 income tax booklet   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. 2012 income tax booklet Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. 2012 income tax booklet Exception for individuals with a disability. 2012 income tax booklet   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. 2012 income tax booklet Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. 2012 income tax booklet   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. 2012 income tax booklet Previous home destroyed or condemned. 2012 income tax booklet   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. 2012 income tax booklet This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). 2012 income tax booklet Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. 2012 income tax booklet Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 2012 income tax booklet   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. 2012 income tax booklet You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. 2012 income tax booklet This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 2012 income tax booklet   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. 2012 income tax booklet Example. 2012 income tax booklet John bought and moved into a home in 2005. 2012 income tax booklet He lived in it as his main home for 2½ years. 2012 income tax booklet For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 2012 income tax booklet He then sold the home at a gain in 2013. 2012 income tax booklet To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. 2012 income tax booklet This means he can disregard those 6 years. 2012 income tax booklet Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. 2012 income tax booklet He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 2012 income tax booklet Period of suspension. 2012 income tax booklet   The period of suspension cannot last more than 10 years. 2012 income tax booklet Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. 2012 income tax booklet You cannot suspend the 5-year period for more than one property at a time. 2012 income tax booklet You can revoke your choice to suspend the 5-year period at any time. 2012 income tax booklet Example. 2012 income tax booklet Mary bought a home on April 1, 1997. 2012 income tax booklet She used it as her main home until August 31, 2000. 2012 income tax booklet On September 1, 2000, she went on qualified official extended duty with the Navy. 2012 income tax booklet She did not live in the house again before selling it on July 31, 2013. 2012 income tax booklet Mary chooses to use the entire 10-year suspension period. 2012 income tax booklet Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. 2012 income tax booklet During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. 2012 income tax booklet She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. 2012 income tax booklet Uniformed services. 2012 income tax booklet   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. 2012 income tax booklet Foreign Service member. 2012 income tax booklet   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. 2012 income tax booklet A Chief of mission. 2012 income tax booklet An Ambassador at large. 2012 income tax booklet A member of the Senior Foreign Service. 2012 income tax booklet A Foreign Service officer. 2012 income tax booklet Part of the Foreign Service personnel. 2012 income tax booklet Employee of the intelligence community. 2012 income tax booklet   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. 2012 income tax booklet The Office of the Director of National Intelligence. 2012 income tax booklet The Central Intelligence Agency. 2012 income tax booklet The National Security Agency. 2012 income tax booklet The Defense Intelligence Agency. 2012 income tax booklet The National Geospatial-Intelligence Agency. 2012 income tax booklet The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. 2012 income tax booklet Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. 2012 income tax booklet The Bureau of Intelligence and Research of the Department of State. 2012 income tax booklet Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. 2012 income tax booklet Qualified official extended duty. 2012 income tax booklet   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. 2012 income tax booklet   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 2012 income tax booklet Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. 2012 income tax booklet (But see Special rules for joint returns, next. 2012 income tax booklet ) Special rules for joint returns. 2012 income tax booklet   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 2012 income tax booklet You are married and file a joint return for the year. 2012 income tax booklet Either you or your spouse meets the ownership test. 2012 income tax booklet Both you and your spouse meet the use test. 2012 income tax booklet During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. 2012 income tax booklet If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. 2012 income tax booklet For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. 2012 income tax booklet Example 1—one spouse sells a home. 2012 income tax booklet Emily sells her home in June 2013 for a gain of $300,000. 2012 income tax booklet She marries Jamie later in the year. 2012 income tax booklet She meets the ownership and use tests, but Jamie does not. 2012 income tax booklet Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. 2012 income tax booklet The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. 2012 income tax booklet Example 2—each spouse sells a home. 2012 income tax booklet The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. 2012 income tax booklet He meets the ownership and use tests on his home, but Emily does not. 2012 income tax booklet Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. 2012 income tax booklet However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. 2012 income tax booklet Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. 2012 income tax booklet The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. 2012 income tax booklet Sale of main home by surviving spouse. 2012 income tax booklet   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. 2012 income tax booklet   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. 2012 income tax booklet The sale or exchange took place after 2008. 2012 income tax booklet The sale or exchange took place no more than 2 years after the date of death of your spouse. 2012 income tax booklet You have not remarried. 2012 income tax booklet You and your spouse met the use test at the time of your spouse's death. 2012 income tax booklet You or your spouse met the ownership test at the time of your spouse's death. 2012 income tax booklet Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. 2012 income tax booklet The ownership and use tests were described earlier. 2012 income tax booklet Example. 2012 income tax booklet Harry owned and used a house as his main home since 2009. 2012 income tax booklet Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. 2012 income tax booklet Harry died on August 15, 2013, and Wilma inherited the property. 2012 income tax booklet Wilma sold the property on September 1, 2013, at which time she had not remarried. 2012 income tax booklet Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. 2012 income tax booklet Home transferred from spouse. 2012 income tax booklet   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. 2012 income tax booklet Use of home after divorce. 2012 income tax booklet   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. 2012 income tax booklet Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. 2012 income tax booklet This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. 2012 income tax booklet In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. 2012 income tax booklet A change in place of employment. 2012 income tax booklet Health. 2012 income tax booklet Unforeseen circumstances. 2012 income tax booklet Qualified individual. 2012 income tax booklet   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. 2012 income tax booklet You. 2012 income tax booklet Your spouse. 2012 income tax booklet A co-owner of the home. 2012 income tax booklet A person whose main home is the same as yours. 2012 income tax booklet Primary reason for sale. 2012 income tax booklet   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. 2012 income tax booklet You qualify under a “safe harbor. 2012 income tax booklet ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. 2012 income tax booklet Safe harbors corresponding to the reasons listed above are described later. 2012 income tax booklet A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. 2012 income tax booklet  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. 2012 income tax booklet Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. 2012 income tax booklet Employment. 2012 income tax booklet   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. 2012 income tax booklet It also includes the start or continuation of self-employment. 2012 income tax booklet Distance safe harbor. 2012 income tax booklet   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). 2012 income tax booklet Example. 2012 income tax booklet Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. 2012 income tax booklet He got a job in North Carolina and sold his townhouse in 2013. 2012 income tax booklet Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. 2012 income tax booklet Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. 2012 income tax booklet Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. 2012 income tax booklet The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. 2012 income tax booklet For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. 2012 income tax booklet Parent, grandparent, stepmother, stepfather. 2012 income tax booklet Child, grandchild, stepchild, adopted child, eligible foster child. 2012 income tax booklet Brother, sister, stepbrother, stepsister, half-brother, half-sister. 2012 income tax booklet Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. 2012 income tax booklet Uncle, aunt, nephew, niece, or cousin. 2012 income tax booklet Example. 2012 income tax booklet In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. 2012 income tax booklet Lauren's father has a chronic disease and is unable to care for himself. 2012 income tax booklet In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. 2012 income tax booklet Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. 2012 income tax booklet Doctor's recommendation safe harbor. 2012 income tax booklet   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. 2012 income tax booklet Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. 2012 income tax booklet You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. 2012 income tax booklet Specific event safe harbors. 2012 income tax booklet   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. 2012 income tax booklet An involuntary conversion of your home, such as when your home is destroyed or condemned. 2012 income tax booklet Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. 2012 income tax booklet In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. 2012 income tax booklet An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. 2012 income tax booklet For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. 2012 income tax booklet Reasonable basic living expenses. 2012 income tax booklet   Reasonable basic living expenses for your household include the following. 2012 income tax booklet Amounts spent for food. 2012 income tax booklet Amounts spent for clothing. 2012 income tax booklet Housing and related expenses. 2012 income tax booklet Medical expenses. 2012 income tax booklet Transportation expenses. 2012 income tax booklet Tax payments. 2012 income tax booklet Court-ordered payments. 2012 income tax booklet Expenses reasonably necessary to produce income. 2012 income tax booklet   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. 2012 income tax booklet Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. 2012 income tax booklet Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). 2012 income tax booklet Exceptions. 2012 income tax booklet   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. 2012 income tax booklet Calculation. 2012 income tax booklet   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. 2012 income tax booklet   For examples of this calculation, see Business Use or Rental of Home , next. 2012 income tax booklet Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. 2012 income tax booklet Example 1. 2012 income tax booklet On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. 2012 income tax booklet She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. 2012 income tax booklet The house was rented from June 1, 2009, to March 31, 2011. 2012 income tax booklet Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. 2012 income tax booklet Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. 2012 income tax booklet During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. 2012 income tax booklet Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. 2012 income tax booklet Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. 2012 income tax booklet Example 2. 2012 income tax booklet William owned and used a house as his main home from 2007 through 2010. 2012 income tax booklet On January 1, 2011, he moved to another state. 2012 income tax booklet He rented his house from that date until April 30, 2013, when he sold it. 2012 income tax booklet During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. 2012 income tax booklet Because it was rental property at the time of the sale, he must report the sale on Form 4797. 2012 income tax booklet Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. 2012 income tax booklet Because he met the ownership and use tests, he can exclude gain up to $250,000. 2012 income tax booklet However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. 2012 income tax booklet Depreciation after May 6, 1997. 2012 income tax booklet   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. 2012 income tax booklet If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. 2012 income tax booklet Unrecaptured section 1250 gain. 2012 income tax booklet   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. 2012 income tax booklet To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. 2012 income tax booklet Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. 2012 income tax booklet Worksheet 2. 2012 income tax booklet Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. 2012 income tax booklet Gain or (Loss) on Sale       1. 2012 income tax booklet   Selling price of home 1. 2012 income tax booklet     2. 2012 income tax booklet   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. 2012 income tax booklet     3. 2012 income tax booklet   Subtract line 2 from line 1. 2012 income tax booklet This is the amount realized 3. 2012 income tax booklet     4. 2012 income tax booklet   Adjusted basis of home sold (from Worksheet 1, line 13) 4. 2012 income tax booklet     5. 2012 income tax booklet   Gain or (loss) on the sale. 2012 income tax booklet Subtract line 4 from line 3. 2012 income tax booklet If this is a loss, stop here 5. 2012 income tax booklet 200,000   Part 2. 2012 income tax booklet Exclusion and Taxable Gain       6. 2012 income tax booklet   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. 2012 income tax booklet If none, enter -0- 6. 2012 income tax booklet 10,000   7. 2012 income tax booklet   Subtract line 6 from line 5. 2012 income tax booklet If the result is less than zero, enter -0- 7. 2012 income tax booklet 190,000   8. 2012 income tax booklet   Aggregate number of days of nonqualified use after 2008. 2012 income tax booklet If none, enter -0-. 2012 income tax booklet  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. 2012 income tax booklet 668   9. 2012 income tax booklet   Number of days taxpayer owned the property 9. 2012 income tax booklet 2,080   10. 2012 income tax booklet   Divide the amount on line 8 by the amount on line 9. 2012 income tax booklet Enter the result as a decimal (rounded to at least 3 places). 2012 income tax booklet But do not enter an amount greater than 1. 2012 income tax booklet 00 10. 2012 income tax booklet 0. 2012 income tax booklet 321   11. 2012 income tax booklet   Gain allocated to nonqualified use. 2012 income tax booklet (Line 7 multiplied by line 10) 11. 2012 income tax booklet 60,990   12. 2012 income tax booklet   Gain eligible for exclusion. 2012 income tax booklet Subtract line 11 from line 7 12. 2012 income tax booklet 129,010   13. 2012 income tax booklet   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). 2012 income tax booklet  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. 2012 income tax booklet If you do  not qualify to exclude gain, enter -0- 13. 2012 income tax booklet 250,000   14. 2012 income tax booklet   Exclusion. 2012 income tax booklet Enter the smaller of line 12 or line 13 14. 2012 income tax booklet 129,010   15. 2012 income tax booklet   Taxable gain. 2012 income tax booklet Subtract line 14 from line 5. 2012 income tax booklet Report your taxable gain as described under Reporting the Sale . 2012 income tax booklet If the amount on line 6 is more than zero, complete line 16 15. 2012 income tax booklet 70,990   16. 2012 income tax booklet   Enter the smaller of line 6 or line 15. 2012 income tax booklet Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. 2012 income tax booklet 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. 2012 income tax booklet Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. 2012 income tax booklet In addition, you do not need to report the sale of the business or rental part on Form 4797. 2012 income tax booklet This is true whether or not you were entitled to claim any depreciation. 2012 income tax booklet However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. 2012 income tax booklet See Depreciation after May 6, 1997, earlier. 2012 income tax booklet Example 1. 2012 income tax booklet Ray sold his main home in 2013 at a $30,000 gain. 2012 income tax booklet He has no gains or losses from the sale of property other than the gain from the sale of his home. 2012 income tax booklet He meets the ownership and use tests to exclude the gain from his income. 2012 income tax booklet However, he used part of the home as a business office in 2012 and claimed $500 depreciation. 2012 income tax booklet Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. 2012 income tax booklet In addition, he does not have to report any part of the gain on Form 4797. 2012 income tax booklet Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. 2012 income tax booklet He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). 2012 income tax booklet Example 2. 2012 income tax booklet The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. 2012 income tax booklet Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. 2012 income tax booklet Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. 2012 income tax booklet Examples are: A working farm on which your house was located, A duplex in w
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Contact My Local Office in South Carolina

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Charleston 1 Poston Rd. 
Charleston, SC 29407

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

    Services Provided

(843) 566-0209 
Columbia  1835 Assembly St.
Columbia, SC 29201 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

    Services Provided

(803) 765-5544 
Florence  401 W. Evans St.
Florence, SC 29501 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

     Services Provided

(843) 664-8889 
Greenville  440 Roper Mountain Rd.
Greenville, SC 29615 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

    Services Provided

(864) 286-7095 
Myrtle Beach  601 19th Ave. N.
Myrtle Beach, SC 29577 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon-1:00 p.m.)

 

     Services Provided

(843) 626-2700 

* Note: The phone numbers listed in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (803)253-3029 in Columbia or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
1835 Assembly St. MDP 16
Columbia, SC 29201

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The 2012 Income Tax Booklet

2012 income tax booklet Internal Revenue Bulletin:  2009-17  April 27, 2009  Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2009-24 Table of Contents SECTION 1. 2012 income tax booklet PURPOSE SECTION 2. 2012 income tax booklet BACKGROUND SECTION 3. 2012 income tax booklet SCOPE SECTION 4. 2012 income tax booklet APPLICATION. 2012 income tax booklet 01 In General. 2012 income tax booklet . 2012 income tax booklet 02 Limitations on Depreciation Deductions for Certain Automobiles. 2012 income tax booklet . 2012 income tax booklet 03 Inclusions in Income of Lessees of Passenger Automobiles. 2012 income tax booklet SECTION 5. 2012 income tax booklet EFFECTIVE DATE SECTION 6. 2012 income tax booklet DRAFTING INFORMATION SECTION 1. 2012 income tax booklet PURPOSE . 2012 income tax booklet 01 This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2009, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2009, including a separate table of inclusion amounts for lessees of trucks and vans. 2012 income tax booklet . 2012 income tax booklet 02 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. 2012 income tax booklet SECTION 2. 2012 income tax booklet BACKGROUND . 2012 income tax booklet 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. 2012 income tax booklet Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. 2012 income tax booklet The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 2012 income tax booklet This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. 2012 income tax booklet . 2012 income tax booklet 02 Section 168(k)(1)(A) provides a 50 percent additional first year depreciation deduction for certain new property acquired by a taxpayer after December 31, 2007, and before January 1, 2010, if no written binding contract for the acquisition of the property existed before January 1, 2008. 2012 income tax booklet Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A) by $8,000 for passenger automobiles to which the 50 percent additional first year depreciation deduction applies. 2012 income tax booklet . 2012 income tax booklet 03 Section 168(k)(2)(D)(i) provides that the 50 percent additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 2012 income tax booklet Section 168(k)(2)(D)(iii) permits a taxpayer to elect to not claim the 50 percent additional first year depreciation deduction for any class of property. 2012 income tax booklet Section 168(k)(4) permits a corporation to elect to not claim the 50 percent additional first year depreciation deduction for all eligible qualified property (that is extension property or that is not extension property, as applicable) and instead to increase the business credit limitation under § 38(c) or the alternative minimum tax credit limitation under § 53(c). 2012 income tax booklet Accordingly, this revenue procedure provides tables for passenger automobiles for which the 50 percent additional depreciation deduction applies and tables for passenger automobiles for which the 50 percent additional first year depreciation deduction does not apply, including passenger automobiles in a class of property for which the taxpayer “elects out” of the 50 percent additional first year depreciation deduction or passenger automobiles that are eligible qualified property to which the § 168(k)(4) election applies. 2012 income tax booklet . 2012 income tax booklet 04 For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. 2012 income tax booklet The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 2012 income tax booklet Under § 1. 2012 income tax booklet 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. 2012 income tax booklet One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 2012 income tax booklet Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 2012 income tax booklet SECTION 3. 2012 income tax booklet SCOPE . 2012 income tax booklet 01 The limitations on depreciation deductions in section 4. 2012 income tax booklet 02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2009, and continue to apply for each taxable year that the passenger automobile remains in service. 2012 income tax booklet . 2012 income tax booklet 02 The tables in section 4. 2012 income tax booklet 03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2009. 2012 income tax booklet Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 2012 income tax booklet See Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2002-14, 2002-1 C. 2012 income tax booklet B. 2012 income tax booklet 450, for passenger automobiles first leased before January 1, 2003, Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2003-75, 2003-2 C. 2012 income tax booklet B. 2012 income tax booklet 1018, for passenger automobiles first leased during calendar year 2003, Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2004-20, 2004-1 C. 2012 income tax booklet B. 2012 income tax booklet 642, for passenger automobiles first leased during calendar year 2004, Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2005-13, 2005-1 C. 2012 income tax booklet B. 2012 income tax booklet 759, for passenger automobiles first leased during calendar year 2005, Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2006-18, 2006-1 C. 2012 income tax booklet B. 2012 income tax booklet 645, for passenger automobiles first leased during calendar year 2006, Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2007-30, 2007-1 C. 2012 income tax booklet B. 2012 income tax booklet 1104, for passenger automobiles first leased during calendar year 2007, and Rev. 2012 income tax booklet Proc. 2012 income tax booklet 2008-22, 2008-12 I. 2012 income tax booklet R. 2012 income tax booklet B. 2012 income tax booklet 658, for passenger automobiles first leased during calendar year 2008. 2012 income tax booklet SECTION 4. 2012 income tax booklet APPLICATION . 2012 income tax booklet 01 In General. 2012 income tax booklet (1) Limitations on depreciation deductions for certain automobiles. 2012 income tax booklet The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2009 are in Tables 1 through 4 in section 4. 2012 income tax booklet 02(2) of this revenue procedure. 2012 income tax booklet (2) Inclusions in income of lessees of passenger automobiles. 2012 income tax booklet A taxpayer first leasing a passenger automobile during calendar year 2009 must determine the inclusion amount that is added to gross income using Tables 5 and 6 in section 4. 2012 income tax booklet 03 of this revenue procedure. 2012 income tax booklet In addition, the taxpayer must follow the procedures of § 1. 2012 income tax booklet 280F-7(a). 2012 income tax booklet . 2012 income tax booklet 02 Limitations on Depreciation Deductions for Certain Automobiles. 2012 income tax booklet (1) Amount of the inflation adjustment. 2012 income tax booklet (a) Passenger automobiles (other than trucks or vans). 2012 income tax booklet Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 2012 income tax booklet The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 2012 income tax booklet The new car component of the CPI was 115. 2012 income tax booklet 2 for October 1987 and 134. 2012 income tax booklet 837 for October 2008. 2012 income tax booklet The October 2008 index exceeded the October 1987 index by 19. 2012 income tax booklet 637. 2012 income tax booklet The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2009 for passenger automobiles (other than trucks and vans) is 17. 2012 income tax booklet 05 percent (19. 2012 income tax booklet 637/115. 2012 income tax booklet 2 x 100%). 2012 income tax booklet This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2009. 2012 income tax booklet The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. 2012 income tax booklet 1705, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2009. 2012 income tax booklet (b) Trucks and vans. 2012 income tax booklet To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2009, the new truck component of the CPI is used instead of the new car component. 2012 income tax booklet The new truck component of the CPI was 112. 2012 income tax booklet 4 for October 1987 and 133. 2012 income tax booklet 640 for October 2008. 2012 income tax booklet The October 2008 index exceeded the October 1987 index by 21. 2012 income tax booklet 24. 2012 income tax booklet The Service has, therefore, determined that the automobile price inflation adjustment for 2009 for trucks and vans is 18. 2012 income tax booklet 90 percent (21. 2012 income tax booklet 24/112. 2012 income tax booklet 4 x 100%). 2012 income tax booklet This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2009. 2012 income tax booklet The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. 2012 income tax booklet 1890, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans. 2012 income tax booklet (2) Amount of the limitation. 2012 income tax booklet For passenger automobiles placed in service by the taxpayer in calendar year 2009, Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year. 2012 income tax booklet Use Table 1 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a passenger automobile (other than a truck or van) in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a passenger automobile that is eligible qualified property to which the § 168(k)(4) election applies. 2012 income tax booklet Use Table 2 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. 2012 income tax booklet Use Table 3 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a truck or van in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a truck or van that is eligible qualified property to which the § 168(k)(4) election applies. 2012 income tax booklet Use Table 4 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. 2012 income tax booklet REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $2,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 2 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $10,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 3 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 . 2012 income tax booklet 03 Inclusions in Income of Lessees of Passenger Automobiles. 2012 income tax booklet The inclusion amounts for passenger automobiles first leased in calendar year 2009 are calculated under the procedures described in § 1. 2012 income tax booklet 280F-7(a). 2012 income tax booklet Lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 6 of this revenue procedure. 2012 income tax booklet REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 9 19 28 34 38 19,000 19,500 10 21 32 38 43 19,500 20,000 11 24 36 42 48 20,000 20,500 12 27 39 46 54 20,500 21,000 13 29 43 51 58 21,000 21,500 15 31 47 55 64 21,500 22,000 16 34 50 60 68 22,000 23,000 17 38 56 66 76 23,000 24,000 20 42 64 75 86 24,000 25,000 22 47 71 84 96 25,000 26,000 24 52 78 93 107 26,000 27,000 26 58 85 101 117 27,000 28,000 29 62 93 110 127 28,000 29,000 31 67 100 119 138 29,000 30,000 33 72 108 128 147 30,000 31,000 35 77 115 137 157 31,000 32,000 38 82 122 146 167 32,000 33,000 40 87 129 155 178 33,000 34,000 42 92 137 163 188 34,000 35,000 44 97 144 172 199 35,000 36,000 47 102 151 181 208 36,000 37,000 49 107 159 189 219 37,000 38,000 51 112 166 199 228 38,000 39,000 53 117 173 208 239 39,000 40,000 56 122 180 216 250 40,000 41,000 58 127 188 225 259 41,000 42,000 60 132 195 234 269 42,000 43,000 62 137 203 242 280 43,000 44,000 65 141 210 252 290 44,000 45,000 67 146 218 260 300 45,000 46,000 69 151 225 269 311 46,000 47,000 71 157 232 278 320 47,000 48,000 74 161 240 286 331 48,000 49,000 76 166 247 296 340 49,000 50,000 78 171 255 304 351 50,000 51,000 80 176 262 313 361 51,000 52,000 83 181 269 322 371 52,000 53,000 85 186 276 331 381 53,000 54,000 87 191 284 339 392 54,000 55,000 89 196 291 349 401 55,000 56,000 92 201 298 357 412 56,000 57,000 94 206 306 365 423 57,000 58,000 96 211 313 375 432 58,000 59,000 98 216 320 384 442 59,000 60,000 101 221 327 393 452 60,000 62,000 104 228 339 406 467 62,000 64,000 109 238 353 424 488 64,000 66,000 113 248 368 441 509 66,000 68,000 118 258 382 459 529 68,000 70,000 122 268 397 476 550 70,000 72,000 127 277 413 493 570 72,000 74,000 131 288 427 511 590 74,000 76,000 136 297 442 529 610 76,000 78,000 140 307 457 546 631 78,000 80,000 145 317 471 564 651 80,000 85,000 152 335 497 595 686 85,000 90,000 164 359 534 639 737 90,000 95,000 175 384 570 683 789 95,000 100,000 186 409 607 727 839 100,000 110,000 203 446 662 793 916 110,000 120,000 226 495 736 881 1,018 120,000 130,000 248 545 809 970 1,119 130,000 140,000 271 594 883 1,058 1,220 140,000 150,000 293 644 956 1,146 1,322 150,000 160,000 316 693 1,030 1,234 1,424 160,000 170,000 338 743 1,103 1,322 1,526 170,000 180,000 361 792 1,177 1,410 1,628 180,000 190,000 383 842 1,250 1,498 1,730 190,000 200,000 406 891 1,324 1,586 1,831 200,000 210,000 428 941 1,397 1,675 1,932 210,000 220,000 451 990 1,471 1,762 2,035 220,000 230,000 473 1,040 1,544 1,851 2,136 230,000 240,000 496 1,089 1,618 1,939 2,238 240,000 And up 518 1,139 1,691 2,027 2,340 REV. 2012 income tax booklet PROC. 2012 income tax booklet 2009-24 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Electric Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th and Later $18,500 $19,000 8 17 25 30 35 19,000 19,500 9 19 29 35 40 19,500 20,000 10 22 33 38 45 20,000 20,500 11 25 36 43 50 20,500 21,000 12 27 40 48 55 21,000 21,500 13 30 43 52 60 21,500 22,000 15 32 47 56 66 22,000 23,000 16 36 52 64 72 23,000 24,000 18 41 60 72 83 24,000 25,000 21 45 68 81 93 25,000 26,000 23 50 75 90 103 26,000 27,000 25 56 82 98 114 27,000 28,000 27 61 89 107 124 28,000 29,000 30 65 97 116 134 29,000 30,000 32 70 104 125 144 30,000 31,000 34 75 112 134 154 31,000 32,000 36 80 119 143 164 32,000 33,000 39 85 126 151 175 33,000 34,000 41 90 134 160 184 34,000 35,000 43 95 141 169 195 35,000 36,000 45 100 148 178 205 36,000 37,000 48 105 155 187 215 37,000 38,000 50 110 163 195 226 38,000 39,000 52 115 170 204 236 39,000 40,000 55 120 177 213 246 40,000 41,000 57 125 185 221 256 41,000 42,000 59 130 192 231 266 42,000 43,000 61 135 199 240 276 43,000 44,000 64 139 207 249 286 44,000 45,000 66 144 215 257 296 45,000 46,000 68 149 222 266 307 46,000 47,000 70 155 229 274 317 47,000 48,000 73 159 237 283 327 48,000 49,000 75 164 244 292 338 49,000 50,000 77 169 251 301 348 50,000 51,000 79 174 259 310 357 51,000 52,000 82 179 266 318 368 52,000 53,000 84 184 273 328 378 53,000 54,000 86 189 281 336 388 54,000 55,000 88 194 288 345 399 55,000 56,000 91 199 295 354 408 56,000 57,000 93 204 302 363 419 57,000 58,000 95 209 310 371 429 58,000 59,000 97 214 317 381 439 59,000 60,000 100 219 324 389 450 60,000 62,000 103 226 336 402 465 62,000 64,000 107 236 351 420 485 64,000 66,000 112 246 365 438 505 66,000 68,000 116 256 380 455 526 68,000 70,000 121 266 394 473 546 70,000 72,000 125 276 409 491 566 72,000 74,000 130 286 423 509 586 74,000 76,000 134 296 438 526 607 76,000 78,000 139 305 454 543 627 78,000 80,000 143 316 467 561 648 80,000 85,000 151 333 493 592 684 85,000 90,000 163 357 531 635 735 90,000 95,000 174 382 567 680 785 95,000 100,000 185 407 604 724 836 100,000 110,000 202 444 659 790 912 110,000 120,000 225 493 733 878 1,014 120,000 130,000 247 543 806 966 1,116 130,000 140,000 270 592 880 1,054 1,218 140,000 150,000 292 642 953 1,143 1,319 150,000 160,000 315 691 1,027 1,230 1,421 160,000 170,000 337 741 1,100 1,319 1,522 170,000 180,000 360 790 1,174 1,407 1,624 180,000 190,000 382 840 1,247 1,495 1,726 190,000 200,000 405 889 1,321 1,583 1,828 200,000 210,000 427 939 1,394 1,671 1,930 210,000 220,000 450 988 1,468 1,759 2,031 220,000 230,000 472 1,038 1,541 1,847 2,134 230,000 240,000 495 1,087 1,615 1,935 2,235 240,000 and up 517 1,137 1,688 2,024 2,336 SECTION 5. 2012 income tax booklet EFFECTIVE DATE This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by a taxpayer during calendar year 2009, and to leased passenger automobiles that are first leased by a taxpayer during calendar year 2009. 2012 income tax booklet SECTION 6. 2012 income tax booklet DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 2012 income tax booklet Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 2012 income tax booklet For further information regarding this revenue procedure, contact Mr. 2012 income tax booklet Harvey at (202) 622-4930 (not a toll-free call). 2012 income tax booklet Prev  Up 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