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Do You File Taxes If You Are Unemployed

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Do You File Taxes If You Are Unemployed

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

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The Do You File Taxes If You Are Unemployed

Do you file taxes if you are unemployed 3. Do you file taxes if you are unemployed   Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Do you file taxes if you are unemployed This chapter explains the limits and rules for deducting the costs of gifts. Do you file taxes if you are unemployed $25 limit. Do you file taxes if you are unemployed   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Do you file taxes if you are unemployed A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Do you file taxes if you are unemployed   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Do you file taxes if you are unemployed This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. Do you file taxes if you are unemployed   If you and your spouse both give gifts, both of you are treated as one taxpayer. Do you file taxes if you are unemployed It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Do you file taxes if you are unemployed If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Do you file taxes if you are unemployed Example. Do you file taxes if you are unemployed Bob Jones sells products to Local Company. Do you file taxes if you are unemployed He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. Do you file taxes if you are unemployed They paid $80 for each gift basket, or $240 total. Do you file taxes if you are unemployed Three of Local Company's executives took the gift baskets home for their families' use. Do you file taxes if you are unemployed Bob and Jan have no independent business relationship with any of the executives' other family members. Do you file taxes if you are unemployed They can deduct a total of $75 ($25 limit × 3) for the gift baskets. Do you file taxes if you are unemployed Incidental costs. Do you file taxes if you are unemployed   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Do you file taxes if you are unemployed   A cost is incidental only if it does not add substantial value to the gift. Do you file taxes if you are unemployed For example, the cost of gift wrapping is an incidental cost. Do you file taxes if you are unemployed However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Do you file taxes if you are unemployed Exceptions. Do you file taxes if you are unemployed   The following items are not considered gifts for purposes of the $25 limit. Do you file taxes if you are unemployed An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Do you file taxes if you are unemployed Examples include pens, desk sets, and plastic bags and cases. Do you file taxes if you are unemployed Signs, display racks, or other promotional material to be used on the business premises of the recipient. Do you file taxes if you are unemployed    Figure B. Do you file taxes if you are unemployed When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Do you file taxes if you are unemployed (Do not use this chart if your home is your principal place of business. Do you file taxes if you are unemployed See Office in the home . Do you file taxes if you are unemployed ) Please click here for the text description of the image. Do you file taxes if you are unemployed Figure B. Do you file taxes if you are unemployed When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. Do you file taxes if you are unemployed 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. Do you file taxes if you are unemployed   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Do you file taxes if you are unemployed However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Do you file taxes if you are unemployed    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Do you file taxes if you are unemployed You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Do you file taxes if you are unemployed   You can change your treatment of the tickets at a later date by filing an amended return. Do you file taxes if you are unemployed Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Do you file taxes if you are unemployed    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Do you file taxes if you are unemployed You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Do you file taxes if you are unemployed Prev  Up  Next   Home   More Online Publications