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2040 Ez Form

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2040 Ez Form

2040 ez form Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. 2040 ez form Proc. 2040 ez form 2009-37 Table of Contents SECTION 1. 2040 ez form PURPOSE SECTION 2. 2040 ez form BACKGROUND SECTION 3. 2040 ez form SCOPE SECTION 4. 2040 ez form ELECTION PROCEDURES SECTION 5. 2040 ez form REQUIRED INFORMATION STATEMENT SECTION 6. 2040 ez form EFFECTIVE DATE SECTION 7. 2040 ez form TRANSITION RULE SECTION 8. 2040 ez form PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. 2040 ez form PURPOSE . 2040 ez form 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. 2040 ez form . 2040 ez form 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. 2040 ez form This revenue procedure describes the time and manner of providing this additional information. 2040 ez form . 2040 ez form 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. 2040 ez form Taxpayers should be aware that these regulations may be retroactive. 2040 ez form See § 7805(b)(2). 2040 ez form This revenue procedure may be modified to provide procedures consistent with additional guidance. 2040 ez form SECTION 2. 2040 ez form BACKGROUND . 2040 ez form 01 Section 108(i), Generally. 2040 ez form Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. 2040 ez form L. 2040 ez form No. 2040 ez form 111-5, 123 Stat. 2040 ez form 338. 2040 ez form In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. 2040 ez form Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). 2040 ez form The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. 2040 ez form 1273-1(d) of the Income Tax Regulations. 2040 ez form The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. 2040 ez form For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). 2040 ez form A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). 2040 ez form See § 108(i)(5)(D). 2040 ez form The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. 2040 ez form Section 108(i)(5)(D)(ii). 2040 ez form For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. 2040 ez form . 2040 ez form 02 Applicable Debt Instrument. 2040 ez form Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. 2040 ez form The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). 2040 ez form Section 108(i)(3)(B). 2040 ez form For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. 2040 ez form 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. 2040 ez form 1502-13(g)(5). 2040 ez form . 2040 ez form 03 Reacquisition. 2040 ez form Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). 2040 ez form The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. 2040 ez form See § 108(i)(4)(B). 2040 ez form The term “acquisition” also includes an indirect acquisition within the meaning of § 1. 2040 ez form 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). 2040 ez form For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. 2040 ez form . 2040 ez form 04 General Requirements for the Section 108(i) Election. 2040 ez form Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. 2040 ez form (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. 2040 ez form ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. 2040 ez form Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. 2040 ez form . 2040 ez form 05 Section 108(i) Elections Made by Pass-through Entities. 2040 ez form In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. 2040 ez form Section 108(i)(5)(B)(iii). 2040 ez form . 2040 ez form 06 Additional Information on Subsequent Years’ Returns. 2040 ez form Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. 2040 ez form . 2040 ez form 07 Exclusivity. 2040 ez form Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). 2040 ez form . 2040 ez form 08 Allocation of Deferred COD Income on Partnership Indebtedness. 2040 ez form Section 4. 2040 ez form 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. 2040 ez form If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. 2040 ez form 704-1(b)(2)(iii). 2040 ez form Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). 2040 ez form The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). 2040 ez form The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). 2040 ez form . 2040 ez form 09 Partner’s Deferred § 752 Amount. 2040 ez form A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). 2040 ez form A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). 2040 ez form To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. 2040 ez form 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). 2040 ez form See Rev. 2040 ez form Rul. 2040 ez form 92-97, 1992-2 C. 2040 ez form B. 2040 ez form 124, and Rev. 2040 ez form Rul. 2040 ez form 94-4, 1994-1 C. 2040 ez form B. 2040 ez form 195. 2040 ez form A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). 2040 ez form . 2040 ez form 10 Allocation of Deferred COD Income on S Corporation Indebtedness. 2040 ez form For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. 2040 ez form . 2040 ez form 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. 2040 ez form (1) In general. 2040 ez form The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). 2040 ez form These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. 2040 ez form OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). 2040 ez form COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. 2040 ez form See § 1. 2040 ez form 56(g)-1(c)(1). 2040 ez form (2) Exceptions for certain special status corporations. 2040 ez form The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. 2040 ez form OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. 2040 ez form . 2040 ez form 12 Extension of Time to Make Election. 2040 ez form Under § 301. 2040 ez form 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. 2040 ez form An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. 2040 ez form Section 301. 2040 ez form 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. 2040 ez form SECTION 3. 2040 ez form SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). 2040 ez form SECTION 4. 2040 ez form ELECTION PROCEDURES . 2040 ez form 01 In General. 2040 ez form (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. 2040 ez form 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. 2040 ez form 07, 4. 2040 ez form 08, 4. 2040 ez form 09, or 4. 2040 ez form 10 of this revenue procedure. 2040 ez form (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. 2040 ez form 01(1)(a) of this revenue procedure for making the § 108(i) election. 2040 ez form The rules that apply to an automatic extension under § 301. 2040 ez form 9100-2(a) apply to this automatic extension. 2040 ez form . 2040 ez form 02 Section 108(i) Elections Made by Members of Consolidated Groups. 2040 ez form The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. 2040 ez form See § 1. 2040 ez form 1502-77(a). 2040 ez form . 2040 ez form 03 Aggregation Rule. 2040 ez form A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. 2040 ez form A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. 2040 ez form 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. 2040 ez form . 2040 ez form 04 Partial Elections. 2040 ez form (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. 2040 ez form Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. 2040 ez form The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. 2040 ez form (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). 2040 ez form Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. 2040 ez form (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. 2040 ez form Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). 2040 ez form A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. 2040 ez form The provisions of this section 4. 2040 ez form 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. 2040 ez form . 2040 ez form 05 Contents of Election Statement. 2040 ez form A statement meets the requirements of this section 4. 2040 ez form 05 if the statement— (1) Label. 2040 ez form States “Section 108(i) Election” across the top. 2040 ez form (2) Required information. 2040 ez form Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. 2040 ez form 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. 2040 ez form . 2040 ez form 06 Supplemental information. 2040 ez form The statement described in section 4. 2040 ez form 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. 2040 ez form 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. 2040 ez form 05(2)(d) of this revenue procedure. 2040 ez form This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. 2040 ez form If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. 2040 ez form If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. 2040 ez form In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. 2040 ez form 08, 2. 2040 ez form 10 and, if applicable, 4. 2040 ez form 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. 2040 ez form . 2040 ez form 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. 2040 ez form The rules of this section 4. 2040 ez form 07 apply to partnerships other than partnerships described in section 4. 2040 ez form 10 of this revenue procedure. 2040 ez form (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). 2040 ez form For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. 2040 ez form , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. 2040 ez form Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). 2040 ez form (2) Election information statement provided to partners. 2040 ez form The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. 2040 ez form 07(2). 2040 ez form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. 2040 ez form A statement meets the requirements of this section 4. 2040 ez form 07(2) if the statement— (a) Label. 2040 ez form States “Section 108(i) Election Information Statement for Partners” across the top. 2040 ez form (b) Required information. 2040 ez form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. 2040 ez form 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. 2040 ez form 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. 2040 ez form 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. 2040 ez form (c) If a partner fails to provide the written statement required by section 4. 2040 ez form 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. 2040 ez form 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. 2040 ez form (3) Partner reporting requirements. 2040 ez form The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. 2040 ez form 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. 2040 ez form Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. 2040 ez form A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. 2040 ez form If a partner provides its written statement under this section 4. 2040 ez form 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. 2040 ez form 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. 2040 ez form . 2040 ez form 08 Additional Requirements for an S Corporation Making a § 108(i) Election. 2040 ez form (1) Information filing on Schedule K-1 (Form 1120S). 2040 ez form For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. 2040 ez form , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. 2040 ez form S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. 2040 ez form (2) Election information statement provided to shareholders. 2040 ez form The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. 2040 ez form 08(2). 2040 ez form The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. 2040 ez form A statement meets the requirements of this section 4. 2040 ez form 08(2) if the statement— (a) Label. 2040 ez form States “Section 108(i) Election Information Statement for Shareholders” across the top. 2040 ez form (b) Required information. 2040 ez form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. 2040 ez form 06 of this revenue procedure. 2040 ez form . 2040 ez form 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. 2040 ez form The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. 2040 ez form 964-1(c)(3). 2040 ez form Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. 2040 ez form 05 of this revenue procedure and, if applicable, section 4. 2040 ez form 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. 2040 ez form . 2040 ez form 10 Section 108(i) Elections Made By Certain Foreign Partnerships. 2040 ez form The rules of this section 4. 2040 ez form 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). 2040 ez form See § 1. 2040 ez form 6031(a)-1(b). 2040 ez form (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. 2040 ez form 05 of this revenue procedure and, if applicable, section 4. 2040 ez form 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. 2040 ez form 6031(a)-1(b)(5) it files with the Service. 2040 ez form In addition, a nonfiling foreign partnership must include in the information required in section 4. 2040 ez form 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. 2040 ez form S. 2040 ez form persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). 2040 ez form (2) The nonfiling foreign partnership must make the election, in accordance with § 1. 2040 ez form 6031(a)-1(b)(5), by the date provided in section 4. 2040 ez form 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. 2040 ez form (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. 2040 ez form 07(1) of this revenue procedure. 2040 ez form Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). 2040 ez form The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. 2040 ez form 07(2) of this revenue procedure by the date provided in section 4. 2040 ez form 01(1)(a) of this revenue procedure. 2040 ez form The partnership should not attach any statement described in section 4. 2040 ez form 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. 2040 ez form However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. 2040 ez form (4) The partnership and each affected partner must satisfy the requirements of section 4. 2040 ez form 07(3) of this revenue procedure. 2040 ez form . 2040 ez form 11 Protective § 108(i) Election. 2040 ez form (1) In general. 2040 ez form A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. 2040 ez form If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). 2040 ez form Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. 2040 ez form A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. 2040 ez form 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. 2040 ez form 01(1)(a) of this revenue procedure. 2040 ez form The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. 2040 ez form A statement meets the requirements of this section 4. 2040 ez form 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. 2040 ez form 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. 2040 ez form 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. 2040 ez form 06 of this revenue procedure. 2040 ez form (2) Statements provided to shareholders and partners. 2040 ez form (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. 2040 ez form 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. 2040 ez form 11(1)(d) of this revenue procedure. 2040 ez form (b) The partnership or S corporation should not attach the statements described in this section 4. 2040 ez form 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 2040 ez form . 2040 ez form 12 Election-Year Reporting by Tiered Pass-Through Entities. 2040 ez form (1) A partnership required to file a U. 2040 ez form S. 2040 ez form partnership return other than under § 1. 2040 ez form 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. 2040 ez form 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. 2040 ez form 07(1)(a) through (d) of this revenue procedure). 2040 ez form (2) If a partnership described in section 4. 2040 ez form 12(1) of this revenue procedure receives a statement described in sections 4. 2040 ez form 07(2) or 4. 2040 ez form 10(3) of this revenue procedure or this section 4. 2040 ez form 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. 2040 ez form 07(2)(b)(x) of this revenue procedure. 2040 ez form If an S corporation receives a statement described in sections 4. 2040 ez form 07(2) or 4. 2040 ez form 10(3) of this revenue procedure or this section 4. 2040 ez form 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. 2040 ez form 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. 2040 ez form The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. 2040 ez form The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 2040 ez form (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. 2040 ez form 704-1(b)(2)(iii). 2040 ez form The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. 2040 ez form No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. 2040 ez form The partnership allocates amounts described in section 4. 2040 ez form 06 of this revenue procedure under this section 4. 2040 ez form 12(3) as if the additional COD income was realized. 2040 ez form (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. 2040 ez form No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. 2040 ez form (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. 2040 ez form (6) This paragraph 4. 2040 ez form 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. 2040 ez form S. 2040 ez form Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. 2040 ez form 07(1) of this revenue procedure, or a statement described in sections 4. 2040 ez form 07(2) or 4. 2040 ez form 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). 2040 ez form (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. 2040 ez form 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. 2040 ez form 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. 2040 ez form (b) A Category 2 filer must include its share of the information described in section 4. 2040 ez form 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. 2040 ez form Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. 2040 ez form (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. 2040 ez form 12(6)(a)(ii) and 4. 2040 ez form 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. 2040 ez form However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. 2040 ez form (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. 2040 ez form 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. 2040 ez form 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. 2040 ez form 12(1) and (2) of this revenue procedure. 2040 ez form Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. 2040 ez form 12(6) of this revenue procedure. 2040 ez form (8) The provisions of section 4. 2040 ez form 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. 2040 ez form 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. 2040 ez form 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. 2040 ez form 11(1)(d) of this revenue procedure. 2040 ez form SECTION 5. 2040 ez form REQUIRED INFORMATION STATEMENT . 2040 ez form 01 Annual Information Statements. 2040 ez form Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. 2040 ez form 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. 2040 ez form 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. 2040 ez form . 2040 ez form 02 Contents of Statement. 2040 ez form A statement meets the requirements of this section 5. 2040 ez form 02 if the statement— (1) Label. 2040 ez form States “Section 108(i) Information Statement” across the top; (2) Required information. 2040 ez form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. 2040 ez form (3) Election attached. 2040 ez form Includes a copy of the election statement described in section 4. 2040 ez form 05 of this revenue procedure. 2040 ez form . 2040 ez form 03 Additional Annual Reporting Requirements for Certain Partnerships. 2040 ez form The rules of this section 5. 2040 ez form 03 apply to partnerships other than partnerships described in section 5. 2040 ez form 05 of this revenue procedure. 2040 ez form (1) In general. 2040 ez form A partnership that makes an election under § 108(i) (except for a protective election under section 4. 2040 ez form 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. 2040 ez form 01 of this revenue procedure. 2040 ez form In addition, for each taxable year in which a statement is required under section 5. 2040 ez form 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. 2040 ez form 07(1) of this revenue procedure. 2040 ez form (2) Annual information statements provided to partners. 2040 ez form The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. 2040 ez form 01 of this revenue procedure, a statement meeting the requirements of this section 5. 2040 ez form 03(2). 2040 ez form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. 2040 ez form A statement meets the requirements of this section 5. 2040 ez form 03(2) if the statement— (a) Label. 2040 ez form States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. 2040 ez form (b) Required information. 2040 ez form Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. 2040 ez form If a partner fails to provide the written statement required by section 4. 2040 ez form 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. 2040 ez form 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. 2040 ez form . 2040 ez form 04 Additional Annual Reporting Requirements for an S Corporation. 2040 ez form (1) In general. 2040 ez form An S corporation that makes an election under § 108(i) (except for a protective election under section 4. 2040 ez form 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. 2040 ez form 01 of this revenue procedure. 2040 ez form In addition, for each taxable year in which a statement is required under section 5. 2040 ez form 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. 2040 ez form 08(1) of this revenue procedure. 2040 ez form (2) Annual information statements provided to shareholders. 2040 ez form The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. 2040 ez form 01 of this revenue procedure a statement meeting the requirements of this section 5. 2040 ez form 04(2). 2040 ez form The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. 2040 ez form A statement meets the requirements of this section 5. 2040 ez form 04(2) if the statement— (a) Label. 2040 ez form States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. 2040 ez form Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. 2040 ez form . 2040 ez form 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. 2040 ez form (1) The rules of this section 5. 2040 ez form 05 apply to nonfiling foreign partnerships. 2040 ez form (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. 2040 ez form 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. 2040 ez form 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. 2040 ez form 01 of this revenue procedure. 2040 ez form (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. 2040 ez form 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. 2040 ez form (4) For each taxable year in which a statement is required under section 5. 2040 ez form 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. 2040 ez form 07(1) of this revenue procedure. 2040 ez form Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). 2040 ez form The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. 2040 ez form 6031(b)-1T(b). 2040 ez form The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. 2040 ez form 05(2) of this revenue procedure. 2040 ez form (5) For each taxable year for which a statement is required under section 5. 2040 ez form 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. 2040 ez form 03(2) of this revenue procedure. 2040 ez form The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. 2040 ez form . 2040 ez form 06 Information Statements Made on Behalf of Certain Foreign Corporations. 2040 ez form Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. 2040 ez form 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. 2040 ez form 01 of this revenue procedure. 2040 ez form . 2040 ez form 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. 2040 ez form (1) A partnership required to file a U. 2040 ez form S. 2040 ez form partnership return other than under § 1. 2040 ez form 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. 2040 ez form 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. 2040 ez form 07(1)(a) through (d) of this revenue procedure). 2040 ez form (2) If a partnership described in section 5. 2040 ez form 07(1) of this revenue procedure receives a statement described in sections 5. 2040 ez form 03(2) or 5. 2040 ez form 05(5) of this revenue procedure or this section 5. 2040 ez form 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. 2040 ez form If an S corporation receives a statement described in sections 5. 2040 ez form 03(2) or 5. 2040 ez form 05(5) of this revenue procedure or this section 5. 2040 ez form 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. 2040 ez form 03(2)(b)(i) through (viii) of this revenue procedure. 2040 ez form The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. 2040 ez form The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 2040 ez form (3) This paragraph 5. 2040 ez form 07(3) provides the rules for persons described in section 4. 2040 ez form 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. 2040 ez form 03(1) of this revenue procedure, or a statement described in sections 5. 2040 ez form 03(2) or 5. 2040 ez form 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). 2040 ez form (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. 2040 ez form 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. 2040 ez form 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. 2040 ez form (b) A Category 2 filer must include its share of the information described in section 4. 2040 ez form 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. 2040 ez form Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. 2040 ez form (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. 2040 ez form 07(3)(a)(ii) and 5. 2040 ez form 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. 2040 ez form However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. 2040 ez form (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. 2040 ez form 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. 2040 ez form 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. 2040 ez form 07(1) and (2) of this revenue procedure. 2040 ez form Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. 2040 ez form 12(6) of this revenue procedure. 2040 ez form SECTION 6. 2040 ez form EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. 2040 ez form SECTION 7. 2040 ez form TRANSITION RULE . 2040 ez form 01 Noncomplying Election. 2040 ez form Except as otherwise provided in this section 7. 2040 ez form 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. 2040 ez form However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. 2040 ez form . 2040 ez form 02 Modification of Election. 2040 ez form A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). 2040 ez form To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. 2040 ez form . 2040 ez form 03 Notations. 2040 ez form A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. 2040 ez form A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. 2040 ez form See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. 2040 ez form SECTION 8. 2040 ez form PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. 2040 ez form S. 2040 ez form C. 2040 ez form 3507) under control number 1545-2147. 2040 ez form An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. 2040 ez form The collection of information in this revenue procedure is in sections 4, 5 and 7. 2040 ez form This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. 2040 ez form This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. 2040 ez form The collection of information is required to obtain a benefit. 2040 ez form The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. 2040 ez form The estimated total annual reporting burden is 300,000 hours. 2040 ez form The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. 2040 ez form The estimated number of respondents is 50,000. 2040 ez form Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. 2040 ez form Generally, tax returns and return information are confidential, as required by § 6103. 2040 ez form DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. 2040 ez form Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). 2040 ez form For further information regarding this revenue procedure, contact Megan A. 2040 ez form Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. 2040 ez form Blanchard at (202) 622-3950 for questions involving OID, Ronald M. 2040 ez form Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). 2040 ez form Prev  Up  Next   Home   More Internal Revenue Bulletins
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2040 ez form 10. 2040 ez form   Retirement Plans, Pensions, and Annuities Table of Contents What's New Reminder IntroductionThe General Rule. 2040 ez form Individual retirement arrangements (IRAs). 2040 ez form Civil service retirement benefits. 2040 ez form Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. 2040 ez form How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. 2040 ez form Exclusion not limited to cost. 2040 ez form Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. 2040 ez form Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries What's New For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). 2040 ez form However, these distributions are taken into account when determining the modified adjusted gross income threshold. 2040 ez form Distributions from a nonqualified retirement plan are included in net investment income. 2040 ez form See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. 2040 ez form Reminder Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. 2040 ez form For more information, see Designated Roth accounts discussed later. 2040 ez form Introduction This chapter discusses the tax treatment of distributions you receive from: An employee pension or annuity from a qualified plan, A disability retirement, and A purchased commercial annuity. 2040 ez form What is not covered in this chapter. 2040 ez form   The following topics are not discussed in this chapter. 2040 ez form The General Rule. 2040 ez form   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). 2040 ez form For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. 2040 ez form For more information about the General Rule, see Publication 939, General Rule for Pensions and Annuities. 2040 ez form Individual retirement arrangements (IRAs). 2040 ez form   Information on the tax treatment of amounts you receive from an IRA is in chapter 17. 2040 ez form Civil service retirement benefits. 2040 ez form    If you are retired from the federal government (regular, phased, or disability retirement), see Publication 721, Tax Guide to U. 2040 ez form S. 2040 ez form Civil Service Retirement Benefits. 2040 ez form Publication 721 also covers the information that you need if you are the survivor or beneficiary of a federal employee or retiree who died. 2040 ez form Useful Items - You may want to see: Publication 575 Pension and Annuity Income 721 Tax Guide to U. 2040 ez form S. 2040 ez form Civil Service Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2040 ez form 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts General Information Designated Roth accounts. 2040 ez form   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. 2040 ez form Elective deferrals that are designated as Roth contributions are included in your income. 2040 ez form However, qualified distributions are not included in your income. 2040 ez form See Publication 575 for more information. 2040 ez form In-plan rollovers to designated Roth accounts. 2040 ez form   If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2040 ez form The rollover of any untaxed amounts must be included in income. 2040 ez form See Publication 575 for more information. 2040 ez form More than one program. 2040 ez form   If you receive benefits from more than one program under a single trust or plan of your employer, such as a pension plan and a profit-sharing plan, you may have to figure the taxable part of each pension or annuity contract separately. 2040 ez form Your former employer or the plan administrator should be able to tell you if you have more than one pension or annuity contract. 2040 ez form Section 457 deferred compensation plans. 2040 ez form    If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. 2040 ez form If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. 2040 ez form You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. 2040 ez form You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. 2040 ez form   Your 457(b) plan may have a designated Roth account option. 2040 ez form If so, you may be able to roll over amounts to the designated Roth account or make contributions. 2040 ez form Elective deferrals to a designated Roth account are included in your income. 2040 ez form Qualified distributions from a designated Roth account are not subject to tax. 2040 ez form   This chapter covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. 2040 ez form For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525, Taxable and Nontaxable Income. 2040 ez form   For general information on these deferred compensation plans, see Section 457 Deferred Compensation Plans in Publication 575. 2040 ez form Disability pensions. 2040 ez form   If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. 2040 ez form You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. 2040 ez form Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2040 ez form    You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2040 ez form For information on the credit for the elderly or the disabled, see chapter 33. 2040 ez form   Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2040 ez form Report the payments on Form 1040, lines 16a and 16b, or on Form 1040A, lines 12a and 12b. 2040 ez form    Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. 2040 ez form For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. 2040 ez form   For more information on how to report disability pensions, including military and certain government disability pensions, see chapter 5. 2040 ez form Retired public safety officers. 2040 ez form   An eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a government retirement plan to the provider of accident, health, or long-term disability insurance. 2040 ez form See Insurance Premiums for Retired Public Safety Officers in Publication 575 for more information. 2040 ez form Railroad retirement benefits. 2040 ez form   Part of any railroad retirement benefits you receive is treated for tax purposes as social security benefits, and part is treated as an employee pension. 2040 ez form For information about railroad retirement benefits treated as social security benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 2040 ez form For information about railroad retirement benefits treated as an employee pension, see Railroad Retirement Benefits in Publication 575. 2040 ez form Withholding and estimated tax. 2040 ez form   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable parts of amounts paid to you. 2040 ez form You can tell the payer how much to withhold, or not to withhold, by filing Form W-4P. 2040 ez form If you choose not to have tax withheld, or you do not have enough tax withheld, you may have to pay estimated tax. 2040 ez form   If you receive an eligible rollover distribution, you cannot choose not to have tax withheld. 2040 ez form Generally, 20% will be withheld, but no tax will be withheld on a direct rollover of an eligible rollover distribution. 2040 ez form See Direct rollover option under Rollovers, later. 2040 ez form   For more information, see Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2040 ez form Qualified plans for self-employed individuals. 2040 ez form   Qualified plans set up by self-employed individuals are sometimes called Keogh or H. 2040 ez form R. 2040 ez form 10 plans. 2040 ez form Qualified plans can be set up by sole proprietors, partnerships (but not a partner), and corporations. 2040 ez form They can cover self-employed persons, such as the sole proprietor or partners, as well as regular (common-law) employees. 2040 ez form    Distributions from a qualified plan are usually fully taxable because most recipients have no cost basis. 2040 ez form If you have an investment (cost) in the plan, however, your pension or annuity payments from a qualified plan are taxed under the Simplified Method. 2040 ez form For more information about qualified plans, see Publication 560, Retirement Plans for Small Business. 2040 ez form Purchased annuities. 2040 ez form   If you receive pension or annuity payments from a privately purchased annuity contract from a commercial organization, such as an insurance company, you generally must use the General Rule to figure the tax-free part of each annuity payment. 2040 ez form For more information about the General Rule, get Publication 939. 2040 ez form Also, see Variable Annuities in Publication 575 for the special provisions that apply to these annuity contracts. 2040 ez form Loans. 2040 ez form   If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless certain exceptions apply. 2040 ez form This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign. 2040 ez form This means that you must include in income all or part of the amount borrowed. 2040 ez form Even if you do not have to treat the loan as a nonperiodic distribution, you may not be able to deduct the interest on the loan in some situations. 2040 ez form For details, see Loans Treated as Distributions in Publication 575. 2040 ez form For information on the deductibility of interest, see chapter 23. 2040 ez form Tax-free exchange. 2040 ez form   No gain or loss is recognized on an exchange of an annuity contract for another annuity contract if the insured or annuitant remains the same. 2040 ez form However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest accumulated on the contract is ordinary income. 2040 ez form See Transfers of Annuity Contracts in Publication 575 for more information about exchanges of annuity contracts. 2040 ez form How To Report If you file Form 1040, report your total annuity on line 16a and the taxable part on line 16b. 2040 ez form If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. 2040 ez form If you file Form 1040A, report your total annuity on line 12a and the taxable part on line 12b. 2040 ez form If your pension or annuity is fully taxable, enter it on line 12b; do not make an entry on line 12a. 2040 ez form More than one annuity. 2040 ez form   If you receive more than one annuity and at least one of them is not fully taxable, enter the total amount received from all annuities on Form 1040, line 16a, or Form 1040A, line 12a, and enter the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2040 ez form If all the annuities you receive are fully taxable, enter the total of all of them on Form 1040, line 16b, or Form 1040A, line 12b. 2040 ez form Joint return. 2040 ez form   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on Form 1040, line 16a, or Form 1040A, line 12a, and report the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2040 ez form Cost (Investment in the Contract) Before you can figure how much, if any, of a distribution from your pension or annuity plan is taxable, you must determine your cost (your investment in the contract) in the pension or annuity. 2040 ez form Your total cost in the plan includes the total premiums, contributions, or other amounts you paid. 2040 ez form This includes the amounts your employer contributed that were taxable to you when paid. 2040 ez form Cost does not include any amounts you deducted or were excluded from your income. 2040 ez form From this total cost, subtract any refunds of premiums, rebates, dividends, unrepaid loans that were not included in your income, or other tax-free amounts that you received by the later of the annuity starting date or the date on which you received your first payment. 2040 ez form Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. 2040 ez form Designated Roth accounts. 2040 ez form   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. 2040 ez form Your cost will also include any in-plan Roth rollovers you included in income. 2040 ez form Foreign employment contributions. 2040 ez form   If you worked in a foreign country and contributions were made to your retirement plan, special rules apply in determining your cost. 2040 ez form See Foreign employment contributions under Cost (Investment in the Contract) in Publication 575. 2040 ez form Taxation of Periodic Payments Fully taxable payments. 2040 ez form   Generally, if you did not pay any part of the cost of your employee pension or annuity and your employer did not withhold part of the cost from your pay while you worked, the amounts you receive each year are fully taxable. 2040 ez form You must report them on your income tax return. 2040 ez form Partly taxable payments. 2040 ez form   If you paid part of the cost of your pension or annuity, you are not taxed on the part of the pension or annuity you receive that represents a return of your cost. 2040 ez form The rest of the amount you receive is generally taxable. 2040 ez form You figure the tax-free part of the payment using either the Simplified Method or the General Rule. 2040 ez form Your annuity starting date and whether or not your plan is qualified determine which method you must or may use. 2040 ez form   If your annuity starting date is after November 18, 1996, and your payments are from a qualified plan, you must use the Simplified Method. 2040 ez form Generally, you must use the General Rule if your annuity is paid under a nonqualified plan, and you cannot use this method if your annuity is paid under a qualified plan. 2040 ez form   If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. 2040 ez form   If your annuity is paid under a qualified plan and your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. 2040 ez form Exclusion limit. 2040 ez form   Your annuity starting date determines the total amount of annuity payments that you can exclude from your taxable income over the years. 2040 ez form Once your annuity starting date is determined, it does not change. 2040 ez form If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. 2040 ez form That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. 2040 ez form Exclusion limited to cost. 2040 ez form   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. 2040 ez form Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2040 ez form This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2040 ez form Exclusion not limited to cost. 2040 ez form   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 2040 ez form If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. 2040 ez form The total exclusion may be more than your cost. 2040 ez form Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 2040 ez form For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. 2040 ez form For any other annuity, this number is the number of monthly annuity payments under the contract. 2040 ez form Who must use the Simplified Method. 2040 ez form   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you both: Receive pension or annuity payments from a qualified employee plan, qualified employee annuity, or a tax-sheltered annuity (403(b)) plan, and On your annuity starting date, you were either under age 75, or entitled to less than 5 years of guaranteed payments. 2040 ez form Guaranteed payments. 2040 ez form   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. 2040 ez form If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. 2040 ez form How to use the Simplified Method. 2040 ez form    Complete the Simplified Method Worksheet in Publication 575 to figure your taxable annuity for 2013. 2040 ez form Single-life annuity. 2040 ez form    If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. 2040 ez form Enter on line 3 the number shown for your age at the annuity starting date. 2040 ez form Multiple-lives annuity. 2040 ez form   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. 2040 ez form Enter on line 3 the number shown for the combined ages of you and the youngest survivor annuitant at the annuity starting date. 2040 ez form   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 2040 ez form Instead you must use Table 1 and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. 2040 ez form    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity next year. 2040 ez form Example. 2040 ez form Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. 2040 ez form Bill's annuity starting date is January 1, 2013. 2040 ez form The benefits are to be paid for the joint lives of Bill and his wife Kathy, age 65. 2040 ez form Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 2040 ez form Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. 2040 ez form Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. 2040 ez form Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet. 2040 ez form His completed worksheet is shown in Worksheet 10-A. 2040 ez form Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. 2040 ez form Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 2040 ez form The full amount of any annuity payments received after 310 payments are paid must be included in gross income. 2040 ez form If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. 2040 ez form This deduction is not subject to the 2%-of-adjusted- gross-income limit. 2040 ez form Worksheet 10-A. 2040 ez form Simplified Method Worksheet for Bill Smith 1. 2040 ez form Enter the total pension or annuity payments received this year. 2040 ez form Also, add this amount to the total for Form 1040, line 16a, or Form 1040A, line 12a 1. 2040 ez form 14,400 2. 2040 ez form Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion*. 2040 ez form See Cost (Investment in the Contract) , earlier 2. 2040 ez form 31,000       Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). 2040 ez form Otherwise, go to line 3. 2040 ez form         3. 2040 ez form Enter the appropriate number from Table 1 below. 2040 ez form But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. 2040 ez form 310     4. 2040 ez form Divide line 2 by the number on line 3 4. 2040 ez form 100     5. 2040 ez form Multiply line 4 by the number of months for which this year's payments were made. 2040 ez form If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 2040 ez form Otherwise, go to line 6 5. 2040 ez form 1,200     6. 2040 ez form Enter any amounts previously recovered tax free in years after 1986. 2040 ez form This is the amount shown on line 10 of your worksheet for last year 6. 2040 ez form -0-     7. 2040 ez form Subtract line 6 from line 2 7. 2040 ez form 31,000     8. 2040 ez form Enter the smaller of line 5 or line 7 8. 2040 ez form 1,200 9. 2040 ez form Taxable amount for year. 2040 ez form Subtract line 8 from line 1. 2040 ez form Enter the result, but not less than zero. 2040 ez form Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b 9. 2040 ez form 13,200   Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 2040 ez form If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers in Publication 575 before entering an amount on your tax return. 2040 ez form     10. 2040 ez form Was your annuity starting date before 1987? □ Yes. 2040 ez form STOP. 2040 ez form Do not complete the rest of this worksheet. 2040 ez form  ☑ No. 2040 ez form Add lines 6 and 8. 2040 ez form This is the amount you have recovered tax free through 2013. 2040 ez form You will need this number if you need to fill out this worksheet next year 10. 2040 ez form 1,200 11. 2040 ez form Balance of cost to be recovered. 2040 ez form Subtract line 10 from line 2. 2040 ez form If zero, you will not have to complete this worksheet next year. 2040 ez form The payments you receive next year will generally be fully taxable 11. 2040 ez form 29,800 TABLE 1 FOR LINE 3 ABOVE   AND your annuity starting date was— IF the age at annuity starting date was. 2040 ez form . 2040 ez form . 2040 ez form before November 19, 1996, enter on line 3. 2040 ez form . 2040 ez form . 2040 ez form after November 18, 1996, enter on line 3. 2040 ez form . 2040 ez form . 2040 ez form 55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160 TABLE 2 FOR LINE 3 ABOVE IF the combined ages at annuity starting date were. 2040 ez form . 2040 ez form . 2040 ez form   THEN enter on line 3. 2040 ez form . 2040 ez form . 2040 ez form 110 or under   410 111–120   360 121–130   310 131–140   260 141 or older   210 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 2040 ez form Who must use the General Rule. 2040 ez form   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. 2040 ez form Annuity starting before November 19, 1996. 2040 ez form   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. 2040 ez form You also had to use it for any fixed-period annuity. 2040 ez form If you did not have to use the General Rule, you could have chosen to use it. 2040 ez form If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. 2040 ez form   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. 2040 ez form Who cannot use the General Rule. 2040 ez form   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. 2040 ez form See Who must use the Simplified Method , earlier. 2040 ez form More information. 2040 ez form   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. 2040 ez form Taxation of Nonperiodic Payments Nonperiodic distributions are also known as amounts not received as an annuity. 2040 ez form They include all payments other than periodic payments and corrective distributions. 2040 ez form Examples of nonperiodic payments are cash withdrawals, distributions of current earnings, certain loans, and the value of annuity contracts transferred without full and adequate consideration. 2040 ez form Corrective distributions of excess plan contributions. 2040 ez form   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. 2040 ez form To correct an excess, your plan may distribute it to you (along with any income earned on the excess). 2040 ez form For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. 2040 ez form Figuring the taxable amount of nonperiodic payments. 2040 ez form   How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. 2040 ez form If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. 2040 ez form If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. 2040 ez form Annuity starting date. 2040 ez form   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. 2040 ez form Distribution on or after annuity starting date. 2040 ez form   If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. 2040 ez form Distribution before annuity starting date. 2040 ez form   If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. 2040 ez form You exclude from your gross income the part that you allocate to the cost. 2040 ez form You include the remainder in your gross income. 2040 ez form   If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan (nonqualified plan), it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). 2040 ez form This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. 2040 ez form    Distributions from nonqualified plans are subject to the net investment income tax. 2040 ez form See the Instructions for Form 8960. 2040 ez form   For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Publication 575. 2040 ez form Lump-Sum Distributions This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. 2040 ez form If the plan participant was born after January 1, 1936, the taxable amount of this nonperiodic payment is reported as discussed earlier. 2040 ez form A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). 2040 ez form A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution. 2040 ez form The participant's entire balance from a plan does not include certain forfeited amounts. 2040 ez form It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987. 2040 ez form For more information about distributions that do not qualify as lump-sum distributions, see Distributions that do not qualify under Lump-Sum Distributions in Publication 575. 2040 ez form If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. 2040 ez form The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. 2040 ez form The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. 2040 ez form You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part. 2040 ez form Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. 2040 ez form The tax figured on Form 4972 is added to the regular tax figured on your other income. 2040 ez form This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax. 2040 ez form How to treat the distribution. 2040 ez form   If you receive a lump-sum distribution, you may have the following options for how you treat the taxable part. 2040 ez form Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and the part from participation after 1973 as ordinary income. 2040 ez form Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). 2040 ez form Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). 2040 ez form Roll over all or part of the distribution. 2040 ez form See Rollovers , later. 2040 ez form No tax is currently due on the part rolled over. 2040 ez form Report any part not rolled over as ordinary income. 2040 ez form Report the entire taxable part of the distribution as ordinary income on your tax return. 2040 ez form   The first three options are explained in the following discussions. 2040 ez form Electing optional lump-sum treatment. 2040 ez form   You can choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. 2040 ez form If you make this choice, you cannot use either of these optional treatments for any future distributions for the participant. 2040 ez form Taxable and tax-free parts of the distribution. 2040 ez form    The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. 2040 ez form You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free. 2040 ez form Cost. 2040 ez form   In general, your cost is the total of: The plan participant's nondeductible contributions to the plan, The plan participant's taxable costs of any life insurance contract distributed, Any employer contributions that were taxable to the plan participant, and Repayments of any loans that were taxable to the plan participant. 2040 ez form You must reduce this cost by amounts previously distributed tax free. 2040 ez form Net unrealized appreciation (NUA). 2040 ez form   The NUA in employer securities (box 6 of Form 1099-R) received as part of a lump-sum distribution is generally tax free until you sell or exchange the securities. 2040 ez form (For more information, see Distributions of employer securities under Taxation of Nonperiodic Payments in Publication 575. 2040 ez form ) Capital Gain Treatment Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. 2040 ez form The amount treated as capital gain is taxed at a 20% rate. 2040 ez form You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2040 ez form Complete Part II of Form 4972 to choose the 20% capital gain election. 2040 ez form For more information, see Capital Gain Treatment under Lump-Sum Distributions in Publication 575. 2040 ez form 10-Year Tax Option The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. 2040 ez form You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. 2040 ez form You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2040 ez form The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. 2040 ez form You also can treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part. 2040 ez form Complete Part III of Form 4972 to choose the 10-year tax option. 2040 ez form You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax. 2040 ez form Publication 575 illustrates how to complete Form 4972 to figure the separate tax. 2040 ez form Rollovers If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. 2040 ez form For this purpose, the following plans are qualified retirement plans. 2040 ez form A qualified employee plan. 2040 ez form A qualified employee annuity. 2040 ez form A tax-sheltered annuity plan (403(b) plan). 2040 ez form An eligible state or local government section 457 deferred compensation plan. 2040 ez form Eligible rollover distributions. 2040 ez form   Generally, an eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan. 2040 ez form For information about exceptions to eligible rollover distributions, see Publication 575. 2040 ez form Rollover of nontaxable amounts. 2040 ez form   You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) plan, or to a traditional or Roth IRA. 2040 ez form The transfer must be made either through a direct rollover to a qualified plan or 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional or Roth IRA. 2040 ez form   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. 2040 ez form   Any after-tax contributions that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. 2040 ez form To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. 2040 ez form For more information, see the Form 8606 instructions. 2040 ez form Direct rollover option. 2040 ez form   You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. 2040 ez form If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. 2040 ez form Payment to you option. 2040 ez form   If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. 2040 ez form However, the full amount is treated as distributed to you even though you actually receive only 80%. 2040 ez form You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional or Roth IRA. 2040 ez form (See Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2040 ez form )    If you decide to roll over an amount equal to the distribution before withholding, your contribution to the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the amount withheld. 2040 ez form Time for making rollover. 2040 ez form   You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. 2040 ez form (If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended for the period during which the distribution is in a frozen deposit in a financial institution. 2040 ez form )   The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. 2040 ez form   The administrator of a qualified plan must give you a written explanation of your distribution options within a reasonable period of time before making an eligible rollover distribution. 2040 ez form Qualified domestic relations order (QDRO). 2040 ez form   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. 2040 ez form If you receive the distribution as an employee's spouse or former spouse (not as a nonspousal beneficiary), the rollover rules apply to you as if you were the employee. 2040 ez form You can roll over the distribution from the plan into a traditional IRA or to another eligible retirement plan. 2040 ez form See Rollovers in Publication 575 for more information on benefits received under a QDRO. 2040 ez form Rollover by surviving spouse. 2040 ez form   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. 2040 ez form The rollover rules apply to you as if you were the employee. 2040 ez form You can roll over a distribution into a qualified retirement plan or a traditional or Roth IRA. 2040 ez form For a rollover to a Roth IRA, see Rollovers to Roth IRAs , later. 2040 ez form    A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. 2040 ez form However, see Rollovers by nonspouse beneficiary next. 2040 ez form Rollovers by nonspouse beneficiary. 2040 ez form   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. 2040 ez form The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. 2040 ez form The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. 2040 ez form For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs). 2040 ez form Retirement bonds. 2040 ez form   If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA (as discussed in Publication 590) or a qualified employer plan. 2040 ez form Designated Roth accounts. 2040 ez form   You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. 2040 ez form If you want to roll over the part of the distribution that is not included in income, you must make a direct rollover of the entire distribution or you can roll over the entire amount (or any portion) to a Roth IRA. 2040 ez form For more information on rollovers from designated Roth accounts, see Rollovers in Publication 575. 2040 ez form In-plan rollovers to designated Roth accounts. 2040 ez form   If you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2040 ez form The rollover of any untaxed amounts must be included in income. 2040 ez form See Designated Roth accounts under Rollovers in Publication 575 for more information. 2040 ez form Rollovers to Roth IRAs. 2040 ez form   You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. 2040 ez form   You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you had not rolled them over into a Roth IRA. 2040 ez form You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that were taxable to you when paid. 2040 ez form In addition, the 10% tax on early distributions does not apply. 2040 ez form More information. 2040 ez form   For more information on the rules for rolling over distributions, see Rollovers in Publication 575. 2040 ez form Special Additional Taxes To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. 2040 ez form Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. 2040 ez form These special additional taxes are the taxes on: Early distributions, and Excess accumulation (not receiving minimum distributions). 2040 ez form These taxes are discussed in the following sections. 2040 ez form If you must pay either of these taxes, report them on Form 5329. 2040 ez form However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. 2040 ez form Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and write “No” under the heading “Other Taxes” to the left of line 58. 2040 ez form Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. 2040 ez form This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception. 2040 ez form Tax on Early Distributions Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. 2040 ez form This tax applies to the part of the distribution that you must include in gross income. 2040 ez form For this purpose, a qualified retirement plan is: A qualified employee plan, A qualified employee annuity plan, A tax-sheltered annuity plan, or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). 2040 ez form 5% rate on certain early distributions from deferred annuity contracts. 2040 ez form   If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. 2040 ez form A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. 2040 ez form On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. 2040 ez form Attach an explanation to your return. 2040 ez form Distributions from Roth IRAs allocable to a rollover from an eligible retirement plan within the 5-year period. 2040 ez form   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from an eligible retirement plan to a Roth IRA, you take a distribution from the Roth IRA, you may have to pay the additional 10% tax on early distributions. 2040 ez form You generally must pay the 10% additional tax on any amount attributable to the part of the rollover that you had to include in income. 2040 ez form The additional tax is figured on Form 5329. 2040 ez form For more information, see Form 5329 and its instructions. 2040 ez form For information on qualified distributions from Roth IRAs, see Additional Tax on Early Distributions in chapter 2 of Publication 590. 2040 ez form Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. 2040 ez form   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from a 401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on early distributions. 2040 ez form You generally must pay the 10% additional tax on any amount attributable to the part of the in-plan rollover that you had to include in income. 2040 ez form The additional tax is figured on Form 5329. 2040 ez form For more information, see Form 5329 and its instructions. 2040 ez form For information on qualified distributions from designated Roth accounts, see Designated Roth accounts under Taxation of Periodic Payments in Publication 575. 2040 ez form Exceptions to tax. 2040 ez form    Certain early distributions are excepted from the early distribution tax. 2040 ez form If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. 2040 ez form If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. 2040 ez form Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. 2040 ez form On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions. 2040 ez form    If distribution code “1” is incorrectly shown on your Form 1099-R for a distribution received when you were age 59½ or older, include that distribution on Form 5329. 2040 ez form Enter exception number “12” on line 2. 2040 ez form General exceptions. 2040 ez form   The tax does not apply to distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after your separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. 2040 ez form Additional exceptions for qualified retirement plans. 2040 ez form   The tax does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), From a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order, From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10% (or 7. 2040 ez form 5% if you or your spouse are age 65 or older) of your adjusted gross income, whether or not you itemize your deductions for the year, From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election, From an employee stock ownership plan for dividends on employer securities held by the plan, From a qualified retirement plan due to an IRS levy of the plan, From elective deferral accounts under 401(k) or 403(b) plans or similar arrangements that are qualified reservist distributions, or Phased retirement annuity payments made to federal employees. 2040 ez form See Pub. 2040 ez form 721 for more information on the phased retirement program. 2040 ez form Qualified public safety employees. 2040 ez form   If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. 2040 ez form You are a qualified public safety employee if you provide police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50. 2040 ez form Qualified reservist distributions. 2040 ez form   A qualified reservist distribution is not subject to the additional tax on early distributions. 2040 ez form A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 403(b) plan, or a similar arrangement, (b) to an individual ordered or called to active duty (because he or she is a member of a reserve component) for a period of more than 179 days or for an indefinite period, and (c) made during the period beginning on the date of the order or call and ending at the close of the active duty period. 2040 ez form You must have been ordered or called to active duty after September 11, 2001. 2040 ez form For more information, see Qualified reservist distributions under Special Additional Taxes in Publication 575. 2040 ez form Additional exceptions for nonqualified annuity contracts. 2040 ez form   The tax does not apply to distributions from: A deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982, A deferred annuity contract under a qualified personal injury settlement, A deferred annuity contract purchased by your employer upon termination of a qualified employee plan or qualified employee annuity plan and held by your employer until your separation from service, or An immediate annuity contract (a single premium contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually). 2040 ez form Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). 2040 ez form The payments each year cannot be less than the required minimum distribution. 2040 ez form Required distributions not made. 2040 ez form   If the actual distributions to you in any year are less than the minimum required distribution for that year, you are subject to an additional tax. 2040 ez form The tax equals 50% of the part of the required minimum distribution that was not distributed. 2040 ez form   For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan)(for benefits accruing after 1986). 2040 ez form Waiver. 2040 ez form   The tax may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. 2040 ez form See the Instructions for Form 5329 for the procedure to follow if you believe you qualify for a waiver of this tax. 2040 ez form State insurer delinquency proceedings. 2040 ez form   You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. 2040 ez form If your payments are reduced below the minimum due to these proceedings, you should contact your plan administrator. 2040 ez form Under certain conditions, you will not have to pay the 50% excise tax. 2040 ez form Required beginning date. 2040 ez form   Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. 2040 ez form However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. 2040 ez form   If you reached age 70½ in 2013, you may be required to receive your first distribution by April 1, 2014. 2040 ez form Your required distribution then must be made for 2014 by December 31, 2014. 2040 ez form 5% owners. 2040 ez form   If you are a 5% owner, you must begin to receive distributions by April 1 of the year that follows the calendar year in which you reach age 70½. 2040 ez form   You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer. 2040 ez form Age 70½. 2040 ez form   You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. 2040 ez form   For example, if you are retired and your 70th birthday was on June 30, 2013, you were age 70½ on December 30, 2013. 2040 ez form If your 70th birthday was on July 1, 2013, you reached age 70½ on January 1, 2014. 2040 ez form Required distributions. 2040 ez form   By the required beginning date, as explained earlier, you must either: Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), or Begin receiving periodic distributions in annual amounts calculated to distribute your entire interest (for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over the joint lives or joint life expectancies of you and a designated beneficiary (or over a shorter period). 2040 ez form Additional information. 2040 ez form   For more information on this rule, see Tax on Excess Accumulation in Publication 575. 2040 ez form Form 5329. 2040 ez form   You must file Form 5329 if you owe tax because you did not receive a minimum required distribution from your qualified retirement plan. 2040 ez form Survivors and Beneficiaries Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have. 2040 ez form However, some special rules apply. 2040 ez form See Publication 575 for more information. 2040 ez form Survivors of employees. 2040 ez form   If you are entitled to receive a survivor annuity on the death of an employee who died, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. 2040 ez form You must figure the taxable and tax-free parts of your annuity payments using the method that applies as if you were the employee. 2040 ez form Survivors of retirees. 2040 ez form   If you receive benefits as a survivor under a joint and survivor annuity, include those benefits in income in the same way the retiree would have included them in income. 2040 ez form If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule and recovered all of the cost tax free, your survivor payments are fully taxable. 2040 ez form    If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage to your initial survivor annuity payment called for in the contract. 2040 ez form The resulting tax-free amount will then remain fixed. 2040 ez form Any increases in the survivor annuity are fully taxable. 2040 ez form    If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. 2040 ez form This amount remains fixed even if the annuity payments are increased or decreased. 2040 ez form See Simplified Method , earlier. 2040 ez form   In any case, if the annuity starting date is after 1986, the total exclusion over the years cannot be more than the cost. 2040 ez form Estate tax deduction. 2040 ez form   If your annuity was a joint and survivor annuity that was included in the decedent's estate, an estate tax may have been paid on it. 2040 ez form You can deduct the part of the total estate tax that was based on the annuity. 2040 ez form The deceased annuitant must have died after the annuity starting date. 2040 ez form (For details, see section 1. 2040 ez form 691(d)-1 of the regulations. 2040 ez form ) Deduct it in equal amounts over your remaining life expectancy. 2040 ez form   If the decedent died before the annuity starting date of a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in respect of a decedent for which you may be able to claim an estate tax deduction. 2040 ez form   You can take the estate tax deduction as an itemized deduction on Schedule A, Form 1040. 2040 ez form This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. 2040 ez form See Publication 559, Survivors, Executors, and Administrators, for more information on the estate tax deduction. 2040 ez form Prev  Up  Next   Home   More Online Publications