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Free Online Tax Filing 2011

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Free Online Tax Filing 2011

Free online tax filing 2011 Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. Free online tax filing 2011 Proc. Free online tax filing 2011 2009-37 Table of Contents SECTION 1. Free online tax filing 2011 PURPOSE SECTION 2. Free online tax filing 2011 BACKGROUND SECTION 3. Free online tax filing 2011 SCOPE SECTION 4. Free online tax filing 2011 ELECTION PROCEDURES SECTION 5. Free online tax filing 2011 REQUIRED INFORMATION STATEMENT SECTION 6. Free online tax filing 2011 EFFECTIVE DATE SECTION 7. Free online tax filing 2011 TRANSITION RULE SECTION 8. Free online tax filing 2011 PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. Free online tax filing 2011 PURPOSE . Free online tax filing 2011 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. Free online tax filing 2011 . Free online tax filing 2011 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. Free online tax filing 2011 This revenue procedure describes the time and manner of providing this additional information. Free online tax filing 2011 . Free online tax filing 2011 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. Free online tax filing 2011 Taxpayers should be aware that these regulations may be retroactive. Free online tax filing 2011 See § 7805(b)(2). Free online tax filing 2011 This revenue procedure may be modified to provide procedures consistent with additional guidance. Free online tax filing 2011 SECTION 2. Free online tax filing 2011 BACKGROUND . Free online tax filing 2011 01 Section 108(i), Generally. Free online tax filing 2011 Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. Free online tax filing 2011 L. Free online tax filing 2011 No. Free online tax filing 2011 111-5, 123 Stat. Free online tax filing 2011 338. Free online tax filing 2011 In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. Free online tax filing 2011 Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). Free online tax filing 2011 The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. Free online tax filing 2011 1273-1(d) of the Income Tax Regulations. Free online tax filing 2011 The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. Free online tax filing 2011 For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). Free online tax filing 2011 A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). Free online tax filing 2011 See § 108(i)(5)(D). Free online tax filing 2011 The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. Free online tax filing 2011 Section 108(i)(5)(D)(ii). Free online tax filing 2011 For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. Free online tax filing 2011 . Free online tax filing 2011 02 Applicable Debt Instrument. Free online tax filing 2011 Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. Free online tax filing 2011 The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). Free online tax filing 2011 Section 108(i)(3)(B). Free online tax filing 2011 For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. Free online tax filing 2011 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. Free online tax filing 2011 1502-13(g)(5). Free online tax filing 2011 . Free online tax filing 2011 03 Reacquisition. Free online tax filing 2011 Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). Free online tax filing 2011 The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. Free online tax filing 2011 See § 108(i)(4)(B). Free online tax filing 2011 The term “acquisition” also includes an indirect acquisition within the meaning of § 1. Free online tax filing 2011 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). Free online tax filing 2011 For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. Free online tax filing 2011 . Free online tax filing 2011 04 General Requirements for the Section 108(i) Election. Free online tax filing 2011 Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. Free online tax filing 2011 (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. Free online tax filing 2011 ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. Free online tax filing 2011 Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. Free online tax filing 2011 . Free online tax filing 2011 05 Section 108(i) Elections Made by Pass-through Entities. Free online tax filing 2011 In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. Free online tax filing 2011 Section 108(i)(5)(B)(iii). Free online tax filing 2011 . Free online tax filing 2011 06 Additional Information on Subsequent Years’ Returns. Free online tax filing 2011 Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. Free online tax filing 2011 . Free online tax filing 2011 07 Exclusivity. Free online tax filing 2011 Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). Free online tax filing 2011 . Free online tax filing 2011 08 Allocation of Deferred COD Income on Partnership Indebtedness. Free online tax filing 2011 Section 4. Free online tax filing 2011 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. Free online tax filing 2011 If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Free online tax filing 2011 704-1(b)(2)(iii). Free online tax filing 2011 Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). Free online tax filing 2011 The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). Free online tax filing 2011 The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). Free online tax filing 2011 . Free online tax filing 2011 09 Partner’s Deferred § 752 Amount. Free online tax filing 2011 A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). Free online tax filing 2011 A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). Free online tax filing 2011 To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. Free online tax filing 2011 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). Free online tax filing 2011 See Rev. Free online tax filing 2011 Rul. Free online tax filing 2011 92-97, 1992-2 C. Free online tax filing 2011 B. Free online tax filing 2011 124, and Rev. Free online tax filing 2011 Rul. Free online tax filing 2011 94-4, 1994-1 C. Free online tax filing 2011 B. Free online tax filing 2011 195. Free online tax filing 2011 A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). Free online tax filing 2011 . Free online tax filing 2011 10 Allocation of Deferred COD Income on S Corporation Indebtedness. Free online tax filing 2011 For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. Free online tax filing 2011 . Free online tax filing 2011 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. Free online tax filing 2011 (1) In general. Free online tax filing 2011 The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). Free online tax filing 2011 These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. Free online tax filing 2011 OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). Free online tax filing 2011 COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. Free online tax filing 2011 See § 1. Free online tax filing 2011 56(g)-1(c)(1). Free online tax filing 2011 (2) Exceptions for certain special status corporations. Free online tax filing 2011 The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. Free online tax filing 2011 OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. Free online tax filing 2011 . Free online tax filing 2011 12 Extension of Time to Make Election. Free online tax filing 2011 Under § 301. Free online tax filing 2011 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. Free online tax filing 2011 An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. Free online tax filing 2011 Section 301. Free online tax filing 2011 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. Free online tax filing 2011 SECTION 3. Free online tax filing 2011 SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). Free online tax filing 2011 SECTION 4. Free online tax filing 2011 ELECTION PROCEDURES . Free online tax filing 2011 01 In General. Free online tax filing 2011 (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. Free online tax filing 2011 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. Free online tax filing 2011 07, 4. Free online tax filing 2011 08, 4. Free online tax filing 2011 09, or 4. Free online tax filing 2011 10 of this revenue procedure. Free online tax filing 2011 (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. Free online tax filing 2011 01(1)(a) of this revenue procedure for making the § 108(i) election. Free online tax filing 2011 The rules that apply to an automatic extension under § 301. Free online tax filing 2011 9100-2(a) apply to this automatic extension. Free online tax filing 2011 . Free online tax filing 2011 02 Section 108(i) Elections Made by Members of Consolidated Groups. Free online tax filing 2011 The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. Free online tax filing 2011 See § 1. Free online tax filing 2011 1502-77(a). Free online tax filing 2011 . Free online tax filing 2011 03 Aggregation Rule. Free online tax filing 2011 A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. Free online tax filing 2011 A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. Free online tax filing 2011 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. Free online tax filing 2011 . Free online tax filing 2011 04 Partial Elections. Free online tax filing 2011 (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. Free online tax filing 2011 Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. Free online tax filing 2011 The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. Free online tax filing 2011 (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). Free online tax filing 2011 Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. Free online tax filing 2011 (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Free online tax filing 2011 Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). Free online tax filing 2011 A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. Free online tax filing 2011 The provisions of this section 4. Free online tax filing 2011 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. Free online tax filing 2011 . Free online tax filing 2011 05 Contents of Election Statement. Free online tax filing 2011 A statement meets the requirements of this section 4. Free online tax filing 2011 05 if the statement— (1) Label. Free online tax filing 2011 States “Section 108(i) Election” across the top. Free online tax filing 2011 (2) Required information. Free online tax filing 2011 Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. Free online tax filing 2011 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. Free online tax filing 2011 . Free online tax filing 2011 06 Supplemental information. Free online tax filing 2011 The statement described in section 4. Free online tax filing 2011 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. Free online tax filing 2011 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. Free online tax filing 2011 05(2)(d) of this revenue procedure. Free online tax filing 2011 This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. Free online tax filing 2011 If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. Free online tax filing 2011 If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. Free online tax filing 2011 In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. Free online tax filing 2011 08, 2. Free online tax filing 2011 10 and, if applicable, 4. Free online tax filing 2011 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. Free online tax filing 2011 . Free online tax filing 2011 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. Free online tax filing 2011 The rules of this section 4. Free online tax filing 2011 07 apply to partnerships other than partnerships described in section 4. Free online tax filing 2011 10 of this revenue procedure. Free online tax filing 2011 (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). Free online tax filing 2011 For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. Free online tax filing 2011 , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Free online tax filing 2011 Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). Free online tax filing 2011 (2) Election information statement provided to partners. Free online tax filing 2011 The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. Free online tax filing 2011 07(2). Free online tax filing 2011 The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Free online tax filing 2011 A statement meets the requirements of this section 4. Free online tax filing 2011 07(2) if the statement— (a) Label. Free online tax filing 2011 States “Section 108(i) Election Information Statement for Partners” across the top. Free online tax filing 2011 (b) Required information. Free online tax filing 2011 Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. Free online tax filing 2011 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. Free online tax filing 2011 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. Free online tax filing 2011 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. Free online tax filing 2011 (c) If a partner fails to provide the written statement required by section 4. Free online tax filing 2011 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. Free online tax filing 2011 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. Free online tax filing 2011 (3) Partner reporting requirements. Free online tax filing 2011 The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. Free online tax filing 2011 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. Free online tax filing 2011 Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. Free online tax filing 2011 A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. Free online tax filing 2011 If a partner provides its written statement under this section 4. Free online tax filing 2011 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. Free online tax filing 2011 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. Free online tax filing 2011 . Free online tax filing 2011 08 Additional Requirements for an S Corporation Making a § 108(i) Election. Free online tax filing 2011 (1) Information filing on Schedule K-1 (Form 1120S). Free online tax filing 2011 For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. Free online tax filing 2011 , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Free online tax filing 2011 S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. Free online tax filing 2011 (2) Election information statement provided to shareholders. Free online tax filing 2011 The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. Free online tax filing 2011 08(2). Free online tax filing 2011 The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Free online tax filing 2011 A statement meets the requirements of this section 4. Free online tax filing 2011 08(2) if the statement— (a) Label. Free online tax filing 2011 States “Section 108(i) Election Information Statement for Shareholders” across the top. Free online tax filing 2011 (b) Required information. Free online tax filing 2011 Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. Free online tax filing 2011 06 of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. Free online tax filing 2011 The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. Free online tax filing 2011 964-1(c)(3). Free online tax filing 2011 Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. Free online tax filing 2011 05 of this revenue procedure and, if applicable, section 4. Free online tax filing 2011 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. Free online tax filing 2011 . Free online tax filing 2011 10 Section 108(i) Elections Made By Certain Foreign Partnerships. Free online tax filing 2011 The rules of this section 4. Free online tax filing 2011 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). Free online tax filing 2011 See § 1. Free online tax filing 2011 6031(a)-1(b). Free online tax filing 2011 (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. Free online tax filing 2011 05 of this revenue procedure and, if applicable, section 4. Free online tax filing 2011 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. Free online tax filing 2011 6031(a)-1(b)(5) it files with the Service. Free online tax filing 2011 In addition, a nonfiling foreign partnership must include in the information required in section 4. Free online tax filing 2011 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. Free online tax filing 2011 S. Free online tax filing 2011 persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). Free online tax filing 2011 (2) The nonfiling foreign partnership must make the election, in accordance with § 1. Free online tax filing 2011 6031(a)-1(b)(5), by the date provided in section 4. Free online tax filing 2011 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. Free online tax filing 2011 (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. Free online tax filing 2011 07(1) of this revenue procedure. Free online tax filing 2011 Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Free online tax filing 2011 The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. Free online tax filing 2011 07(2) of this revenue procedure by the date provided in section 4. Free online tax filing 2011 01(1)(a) of this revenue procedure. Free online tax filing 2011 The partnership should not attach any statement described in section 4. Free online tax filing 2011 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. Free online tax filing 2011 However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. Free online tax filing 2011 (4) The partnership and each affected partner must satisfy the requirements of section 4. Free online tax filing 2011 07(3) of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 11 Protective § 108(i) Election. Free online tax filing 2011 (1) In general. Free online tax filing 2011 A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. Free online tax filing 2011 If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). Free online tax filing 2011 Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. Free online tax filing 2011 A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. Free online tax filing 2011 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. Free online tax filing 2011 01(1)(a) of this revenue procedure. Free online tax filing 2011 The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. Free online tax filing 2011 A statement meets the requirements of this section 4. Free online tax filing 2011 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. Free online tax filing 2011 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. Free online tax filing 2011 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. Free online tax filing 2011 06 of this revenue procedure. Free online tax filing 2011 (2) Statements provided to shareholders and partners. Free online tax filing 2011 (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. Free online tax filing 2011 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. Free online tax filing 2011 11(1)(d) of this revenue procedure. Free online tax filing 2011 (b) The partnership or S corporation should not attach the statements described in this section 4. Free online tax filing 2011 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free online tax filing 2011 . Free online tax filing 2011 12 Election-Year Reporting by Tiered Pass-Through Entities. Free online tax filing 2011 (1) A partnership required to file a U. Free online tax filing 2011 S. Free online tax filing 2011 partnership return other than under § 1. Free online tax filing 2011 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. Free online tax filing 2011 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Free online tax filing 2011 07(1)(a) through (d) of this revenue procedure). Free online tax filing 2011 (2) If a partnership described in section 4. Free online tax filing 2011 12(1) of this revenue procedure receives a statement described in sections 4. Free online tax filing 2011 07(2) or 4. Free online tax filing 2011 10(3) of this revenue procedure or this section 4. Free online tax filing 2011 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. Free online tax filing 2011 07(2)(b)(x) of this revenue procedure. Free online tax filing 2011 If an S corporation receives a statement described in sections 4. Free online tax filing 2011 07(2) or 4. Free online tax filing 2011 10(3) of this revenue procedure or this section 4. Free online tax filing 2011 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. Free online tax filing 2011 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. Free online tax filing 2011 The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Free online tax filing 2011 The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free online tax filing 2011 (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Free online tax filing 2011 704-1(b)(2)(iii). Free online tax filing 2011 The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Free online tax filing 2011 No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. Free online tax filing 2011 The partnership allocates amounts described in section 4. Free online tax filing 2011 06 of this revenue procedure under this section 4. Free online tax filing 2011 12(3) as if the additional COD income was realized. Free online tax filing 2011 (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. Free online tax filing 2011 No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. Free online tax filing 2011 (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. Free online tax filing 2011 (6) This paragraph 4. Free online tax filing 2011 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. Free online tax filing 2011 S. Free online tax filing 2011 Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. Free online tax filing 2011 07(1) of this revenue procedure, or a statement described in sections 4. Free online tax filing 2011 07(2) or 4. Free online tax filing 2011 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Free online tax filing 2011 (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Free online tax filing 2011 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. Free online tax filing 2011 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Free online tax filing 2011 (b) A Category 2 filer must include its share of the information described in section 4. Free online tax filing 2011 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Free online tax filing 2011 Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Free online tax filing 2011 (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. Free online tax filing 2011 12(6)(a)(ii) and 4. Free online tax filing 2011 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Free online tax filing 2011 However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Free online tax filing 2011 (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. Free online tax filing 2011 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. Free online tax filing 2011 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. Free online tax filing 2011 12(1) and (2) of this revenue procedure. Free online tax filing 2011 Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Free online tax filing 2011 12(6) of this revenue procedure. Free online tax filing 2011 (8) The provisions of section 4. Free online tax filing 2011 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. Free online tax filing 2011 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. Free online tax filing 2011 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. Free online tax filing 2011 11(1)(d) of this revenue procedure. Free online tax filing 2011 SECTION 5. Free online tax filing 2011 REQUIRED INFORMATION STATEMENT . Free online tax filing 2011 01 Annual Information Statements. Free online tax filing 2011 Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. Free online tax filing 2011 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. Free online tax filing 2011 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. Free online tax filing 2011 . Free online tax filing 2011 02 Contents of Statement. Free online tax filing 2011 A statement meets the requirements of this section 5. Free online tax filing 2011 02 if the statement— (1) Label. Free online tax filing 2011 States “Section 108(i) Information Statement” across the top; (2) Required information. Free online tax filing 2011 Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Free online tax filing 2011 (3) Election attached. Free online tax filing 2011 Includes a copy of the election statement described in section 4. Free online tax filing 2011 05 of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 03 Additional Annual Reporting Requirements for Certain Partnerships. Free online tax filing 2011 The rules of this section 5. Free online tax filing 2011 03 apply to partnerships other than partnerships described in section 5. Free online tax filing 2011 05 of this revenue procedure. Free online tax filing 2011 (1) In general. Free online tax filing 2011 A partnership that makes an election under § 108(i) (except for a protective election under section 4. Free online tax filing 2011 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Free online tax filing 2011 01 of this revenue procedure. Free online tax filing 2011 In addition, for each taxable year in which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. Free online tax filing 2011 07(1) of this revenue procedure. Free online tax filing 2011 (2) Annual information statements provided to partners. Free online tax filing 2011 The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure, a statement meeting the requirements of this section 5. Free online tax filing 2011 03(2). Free online tax filing 2011 The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Free online tax filing 2011 A statement meets the requirements of this section 5. Free online tax filing 2011 03(2) if the statement— (a) Label. Free online tax filing 2011 States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. Free online tax filing 2011 (b) Required information. Free online tax filing 2011 Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. Free online tax filing 2011 If a partner fails to provide the written statement required by section 4. Free online tax filing 2011 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. Free online tax filing 2011 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. Free online tax filing 2011 . Free online tax filing 2011 04 Additional Annual Reporting Requirements for an S Corporation. Free online tax filing 2011 (1) In general. Free online tax filing 2011 An S corporation that makes an election under § 108(i) (except for a protective election under section 4. Free online tax filing 2011 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Free online tax filing 2011 01 of this revenue procedure. Free online tax filing 2011 In addition, for each taxable year in which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. Free online tax filing 2011 08(1) of this revenue procedure. Free online tax filing 2011 (2) Annual information statements provided to shareholders. Free online tax filing 2011 The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure a statement meeting the requirements of this section 5. Free online tax filing 2011 04(2). Free online tax filing 2011 The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Free online tax filing 2011 A statement meets the requirements of this section 5. Free online tax filing 2011 04(2) if the statement— (a) Label. Free online tax filing 2011 States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. Free online tax filing 2011 Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Free online tax filing 2011 . Free online tax filing 2011 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. Free online tax filing 2011 (1) The rules of this section 5. Free online tax filing 2011 05 apply to nonfiling foreign partnerships. Free online tax filing 2011 (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. Free online tax filing 2011 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. Free online tax filing 2011 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. Free online tax filing 2011 01 of this revenue procedure. Free online tax filing 2011 (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. Free online tax filing 2011 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. Free online tax filing 2011 (4) For each taxable year in which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. Free online tax filing 2011 07(1) of this revenue procedure. Free online tax filing 2011 Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Free online tax filing 2011 The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. Free online tax filing 2011 6031(b)-1T(b). Free online tax filing 2011 The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. Free online tax filing 2011 05(2) of this revenue procedure. Free online tax filing 2011 (5) For each taxable year for which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. Free online tax filing 2011 03(2) of this revenue procedure. Free online tax filing 2011 The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. Free online tax filing 2011 . Free online tax filing 2011 06 Information Statements Made on Behalf of Certain Foreign Corporations. Free online tax filing 2011 Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. Free online tax filing 2011 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. Free online tax filing 2011 01 of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. Free online tax filing 2011 (1) A partnership required to file a U. Free online tax filing 2011 S. Free online tax filing 2011 partnership return other than under § 1. Free online tax filing 2011 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. Free online tax filing 2011 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Free online tax filing 2011 07(1)(a) through (d) of this revenue procedure). Free online tax filing 2011 (2) If a partnership described in section 5. Free online tax filing 2011 07(1) of this revenue procedure receives a statement described in sections 5. Free online tax filing 2011 03(2) or 5. Free online tax filing 2011 05(5) of this revenue procedure or this section 5. Free online tax filing 2011 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. Free online tax filing 2011 If an S corporation receives a statement described in sections 5. Free online tax filing 2011 03(2) or 5. Free online tax filing 2011 05(5) of this revenue procedure or this section 5. Free online tax filing 2011 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. Free online tax filing 2011 03(2)(b)(i) through (viii) of this revenue procedure. Free online tax filing 2011 The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Free online tax filing 2011 The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Free online tax filing 2011 (3) This paragraph 5. Free online tax filing 2011 07(3) provides the rules for persons described in section 4. Free online tax filing 2011 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. Free online tax filing 2011 03(1) of this revenue procedure, or a statement described in sections 5. Free online tax filing 2011 03(2) or 5. Free online tax filing 2011 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Free online tax filing 2011 (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Free online tax filing 2011 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. Free online tax filing 2011 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Free online tax filing 2011 (b) A Category 2 filer must include its share of the information described in section 4. Free online tax filing 2011 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Free online tax filing 2011 Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Free online tax filing 2011 (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. Free online tax filing 2011 07(3)(a)(ii) and 5. Free online tax filing 2011 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Free online tax filing 2011 However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Free online tax filing 2011 (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. Free online tax filing 2011 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. Free online tax filing 2011 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. Free online tax filing 2011 07(1) and (2) of this revenue procedure. Free online tax filing 2011 Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Free online tax filing 2011 12(6) of this revenue procedure. Free online tax filing 2011 SECTION 6. Free online tax filing 2011 EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. Free online tax filing 2011 SECTION 7. Free online tax filing 2011 TRANSITION RULE . Free online tax filing 2011 01 Noncomplying Election. Free online tax filing 2011 Except as otherwise provided in this section 7. Free online tax filing 2011 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. Free online tax filing 2011 However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 02 Modification of Election. Free online tax filing 2011 A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). Free online tax filing 2011 To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. Free online tax filing 2011 . Free online tax filing 2011 03 Notations. Free online tax filing 2011 A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. Free online tax filing 2011 A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. Free online tax filing 2011 See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. Free online tax filing 2011 SECTION 8. Free online tax filing 2011 PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. Free online tax filing 2011 S. Free online tax filing 2011 C. Free online tax filing 2011 3507) under control number 1545-2147. Free online tax filing 2011 An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Free online tax filing 2011 The collection of information in this revenue procedure is in sections 4, 5 and 7. Free online tax filing 2011 This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. Free online tax filing 2011 This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. Free online tax filing 2011 The collection of information is required to obtain a benefit. Free online tax filing 2011 The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. Free online tax filing 2011 The estimated total annual reporting burden is 300,000 hours. Free online tax filing 2011 The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. Free online tax filing 2011 The estimated number of respondents is 50,000. Free online tax filing 2011 Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Free online tax filing 2011 Generally, tax returns and return information are confidential, as required by § 6103. Free online tax filing 2011 DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. Free online tax filing 2011 Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). Free online tax filing 2011 For further information regarding this revenue procedure, contact Megan A. Free online tax filing 2011 Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. Free online tax filing 2011 Blanchard at (202) 622-3950 for questions involving OID, Ronald M. Free online tax filing 2011 Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). Free online tax filing 2011 Prev  Up  Next   Home   More Internal Revenue Bulletins
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The Free Online Tax Filing 2011

Free online tax filing 2011 Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). Free online tax filing 2011 However, you can still choose to use the previous carryback period. Free online tax filing 2011 You also can choose not to carry back an NOL and only carry it forward. Free online tax filing 2011 Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. Free online tax filing 2011 Corporations can file Form 1139, Corporation Application for Tentative Refund. Free online tax filing 2011 The instructions for these forms will be revised to reflect the new law. Free online tax filing 2011 Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. Free online tax filing 2011 Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. Free online tax filing 2011 These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. Free online tax filing 2011 Tax benefits for the New York Liberty Zone include the following. Free online tax filing 2011 A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. Free online tax filing 2011 It is allowed for the year the property is placed in service. Free online tax filing 2011 No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. Free online tax filing 2011 Classification of Liberty Zone leasehold improvement property as 5-year property. Free online tax filing 2011 Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. Free online tax filing 2011 An increased section 179 deduction for certain Liberty Zone property. Free online tax filing 2011 Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. Free online tax filing 2011 For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. Free online tax filing 2011 In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. Free online tax filing 2011 For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. Free online tax filing 2011 For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. Free online tax filing 2011 In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. Free online tax filing 2011 Other 2001 Changes Other changes are discussed in the following chapters. Free online tax filing 2011 Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. Free online tax filing 2011 Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. Free online tax filing 2011 As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. Free online tax filing 2011 For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. Free online tax filing 2011 Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. Free online tax filing 2011 The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. Free online tax filing 2011 This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. Free online tax filing 2011 For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Free online tax filing 2011 Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. Free online tax filing 2011 For more information on marginal production, see section 613A(c) of the Internal Revenue Code. Free online tax filing 2011 Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. Free online tax filing 2011 The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. Free online tax filing 2011 Certain limits apply. Free online tax filing 2011 For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Free online tax filing 2011 Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. Free online tax filing 2011 Previously, the credit was only allowed for plans established after December 31, 2001. Free online tax filing 2011 For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. Free online tax filing 2011 Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Free online tax filing 2011 For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Free online tax filing 2011 Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Free online tax filing 2011 For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Free online tax filing 2011 Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. Free online tax filing 2011 The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. Free online tax filing 2011 The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. Free online tax filing 2011 For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. Free online tax filing 2011 Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. Free online tax filing 2011 Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. Free online tax filing 2011 Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. Free online tax filing 2011 However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. Free online tax filing 2011 Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. Free online tax filing 2011 To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Free online tax filing 2011 However, certain property placed in service before January 1, 2006, may meet this test. Free online tax filing 2011 Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. Free online tax filing 2011 The property has an estimated production period of more than 2 years. Free online tax filing 2011 The property has an estimated production period of more than 1 year and it costs more than $1 million. Free online tax filing 2011 Transportation property is any tangible personal property used in the trade or business of transporting persons or property. Free online tax filing 2011 For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. Free online tax filing 2011 Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. Free online tax filing 2011 You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. Free online tax filing 2011 Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. Free online tax filing 2011 These special rules have been extended to include property placed in service in 2004. Free online tax filing 2011 For more information about these rules, see Publication 946, How To Depreciate Property. Free online tax filing 2011 Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. Free online tax filing 2011 For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Free online tax filing 2011 Prev  Up  Next   Home   More Online Publications