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H And R Block File Free

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H And R Block File Free

H and r block file free 2. H and r block file free   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. H and r block file free The pay may be in cash, property, or services. H and r block file free It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. H and r block file free For information about deducting employment taxes, see chapter 5. H and r block file free You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. H and r block file free Empowerment zone employment credit (Form 8844). H and r block file free Indian employment credit (Form 8845). H and r block file free Work opportunity credit (Form 5884). H and r block file free Credit for employer differential wage payments (Form 8932). H and r block file free Reduce your deduction for employee wages by the amount of employment credits you claim. H and r block file free For more information about these credits, see the form on which the credit is claimed. H and r block file free Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. H and r block file free Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. H and r block file free These and other requirements that apply to all business expenses are explained in chapter 1. H and r block file free In addition, the pay must meet both of the following tests. H and r block file free Test 1. H and r block file free It must be reasonable. H and r block file free Test 2. H and r block file free It must be for services performed. H and r block file free The form or method of figuring the pay does not affect its deductibility. H and r block file free For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. H and r block file free Test 1—Reasonableness You must be able to prove that the pay is reasonable. H and r block file free Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. H and r block file free If the pay is excessive, the excess pay is disallowed as a deduction. H and r block file free Factors to consider. H and r block file free   Determine the reasonableness of pay by the facts and circumstances. H and r block file free Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. H and r block file free   To determine if pay is reasonable, also consider the following items and any other pertinent facts. H and r block file free The duties performed by the employee. H and r block file free The volume of business handled. H and r block file free The character and amount of responsibility. H and r block file free The complexities of your business. H and r block file free The amount of time required. H and r block file free The cost of living in the locality. H and r block file free The ability and achievements of the individual employee performing the service. H and r block file free The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. H and r block file free Your policy regarding pay for all your employees. H and r block file free The history of pay for each employee. H and r block file free Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. H and r block file free Employee-shareholder salaries. H and r block file free   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. H and r block file free The excessive part of the salary would not be allowed as a salary deduction by the corporation. H and r block file free For more information on corporate distributions to shareholders, see Publication 542, Corporations. H and r block file free Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. H and r block file free For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. H and r block file free Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. H and r block file free If you give property to an employee as an employee achievement award, your deduction may be limited. H and r block file free Achievement awards. H and r block file free   An achievement award is an item of tangible personal property that meets all the following requirements. H and r block file free It is given to an employee for length of service or safety achievement. H and r block file free It is awarded as part of a meaningful presentation. H and r block file free It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. H and r block file free Length-of-service award. H and r block file free    An award will qualify as a length-of-service award only if either of the following applies. H and r block file free The employee receives the award after his or her first 5 years of employment. H and r block file free The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. H and r block file free Safety achievement award. H and r block file free    An award for safety achievement will qualify as an achievement award unless one of the following applies. H and r block file free It is given to a manager, administrator, clerical employee, or other professional employee. H and r block file free During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). H and r block file free Deduction limit. H and r block file free   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. H and r block file free $400 for awards that are not qualified plan awards. H and r block file free $1,600 for all awards, whether or not qualified plan awards. H and r block file free   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. H and r block file free   A highly compensated employee is an employee who meets either of the following tests. H and r block file free The employee was a 5% owner at any time during the year or the preceding year. H and r block file free The employee received more than $115,000 in pay for the preceding year. H and r block file free You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. H and r block file free   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. H and r block file free To figure this average cost, ignore awards of nominal value. H and r block file free Deduct achievement awards as a nonwage business expense on your return or business schedule. H and r block file free You may not owe employment taxes on the value of some achievement awards you provide to an employee. H and r block file free See Publication 15-B. H and r block file free Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. H and r block file free However, the total bonuses, salaries, and other pay must be reasonable for the services performed. H and r block file free If the bonus is paid in property, see Property , later. H and r block file free Gifts of nominal value. H and r block file free    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. H and r block file free Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. H and r block file free For more information on this deduction limit, see Meals and lodging , later. H and r block file free Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. H and r block file free Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. H and r block file free For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. H and r block file free Fringe Benefits A fringe benefit is a form of pay for the performance of services. H and r block file free You can generally deduct the cost of fringe benefits. H and r block file free You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. H and r block file free You also may not owe employment taxes on the value of the fringe benefits. H and r block file free See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. H and r block file free Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. H and r block file free Certain fringe benefits are discussed next. H and r block file free See Publication 15-B for more details on these and other fringe benefits. H and r block file free Meals and lodging. H and r block file free   You can usually deduct the cost of furnishing meals and lodging to your employees. H and r block file free Deduct the cost in whatever category the expense falls. H and r block file free For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. H and r block file free If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. H and r block file free Deduction limit on meals. H and r block file free   You can generally deduct only 50% of the cost of furnishing meals to your employees. H and r block file free However, you can deduct the full cost of the following meals. H and r block file free Meals whose value you include in an employee's wages. H and r block file free Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. H and r block file free This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. H and r block file free Meals you furnish to your employees at the work site when you operate a restaurant or catering service. H and r block file free Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. H and r block file free Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). H and r block file free This does not include meals you furnish on vessels primarily providing luxury water transportation. H and r block file free Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. H and r block file free This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. H and r block file free Employee benefit programs. H and r block file free   Employee benefit programs include the following. H and r block file free Accident and health plans. H and r block file free Adoption assistance. H and r block file free Cafeteria plans. H and r block file free Dependent care assistance. H and r block file free Education assistance. H and r block file free Life insurance coverage. H and r block file free Welfare benefit funds. H and r block file free   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. H and r block file free For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. H and r block file free ). H and r block file free Life insurance coverage. H and r block file free   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. H and r block file free See Regulations section 1. H and r block file free 264-1 for more information. H and r block file free Welfare benefit funds. H and r block file free   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. H and r block file free Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. H and r block file free   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. H and r block file free If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. H and r block file free   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. H and r block file free The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. H and r block file free The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. H and r block file free These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. H and r block file free   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. H and r block file free Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. H and r block file free However, if the employee performs no services, treat the amount you advanced as a loan. H and r block file free If the employee does not repay the loan, treat it as income to the employee. H and r block file free Below-market interest rate loans. H and r block file free   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. H and r block file free See Below-Market Loans in chapter 4. H and r block file free Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. H and r block file free The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. H and r block file free You can claim the deduction only for the tax year in which your employee includes the property's value in income. H and r block file free Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. H and r block file free You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. H and r block file free Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. H and r block file free These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. H and r block file free Restricted property. H and r block file free   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. H and r block file free However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. H and r block file free    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. H and r block file free This means that the recipient is not likely to have to give up his or her rights in the property in the future. H and r block file free Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. H and r block file free However, your deduction may be limited. H and r block file free If you make the payment under an accountable plan, deduct it in the category of the expense paid. H and r block file free For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. H and r block file free If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. H and r block file free See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. H and r block file free Sick and Vacation Pay Sick pay. H and r block file free   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. H and r block file free However, your deduction is limited to amounts not compensated by insurance or other means. H and r block file free Vacation pay. H and r block file free   Vacation pay is an employee benefit. H and r block file free It includes amounts paid for unused vacation leave. H and r block file free You can deduct vacation pay only in the tax year in which the employee actually receives it. H and r block file free This rule applies regardless of whether you use the cash or accrual method of accounting. H and r block file free Prev  Up  Next   Home   More Online Publications
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Diez Consejos Importantes del IRS para Temporada Tributaria

Consejo Tributario del IRS 2014-40SP 25 de marzo de 2014

La temporada de impuestos está a punto de terminar.  Pero usted puede hacer la temporada de impuestos más fácil si no espera hasta el último minuto. Aquí hay 10 consejos importantes de la temporada de impuestos:

  1. Reúna sus archivos.  Acumule todos los registros de impuestos que necesita para presentar su declaración de impuestos. Esto incluye recibos, cheques cancelados y los registros que corrobore los ingresos, deducciones o créditos tributarios que usted reclama en su declaración de impuestos. Guárdelos en un lugar seguro.

  2. Reporte todo sus ingresos. Usted tendrá que reportar sus ingresos (en inglés) de todas los Formularios W-2, salarios y declaración de impuestos, y Formularios 1099 como comprobante de ingresos cuando presente su declaración de impuestos.

  3. Obtenga respuestas. Use la herramienta interactiva Interactive Tax Assistant Tool (en inglés) en la página web del IRS para obtener respuestas a muchas de sus preguntas acerca de los créditos tributarios, deducciones y muchos temas más.

  4. Utilice Free File. Usted puede preparar y presentar electrónicamente su declaración de impuestos gratis con Free File del IRS, disponible exclusivamente en IRS.gov. Si su ingreso fue de $58,000 o menos, usted tiene derecho a usar el software de impuestos gratis. Si su ingreso es mayor, o si se siente cómodo haciendo su propia declaración, puede usar los formularios rellenables de Free File, la versión electrónica de los formularios en papel del IRS. Visite IRS.gov/freefile para ver sus opciones.

  5. Experimente e-file del IRS. La presentación electrónica es la mejor manera de presentar una declaración de impuestos. Es preciso, seguro y fácil. El año pasado, más de 122 millones de contribuyentes usaron e-file del IRS. Si usted debe impuestos, tiene la opción de presentar temprano y pagar antes del 15 de abril.

  6. Considere sus opciones de presentar. Usted tiene varias opciones para presentar su declaración de impuestos. Puede prepararlo usted mismo o ir a un preparador de impuestos. Puede ser elegible para la ayuda gratuita de cara a cara en un Programa de Ayuda Voluntaria a los Contribuyentes (VITA, por sus siglas en inglés) o de Asesoramiento Tributario para las Personas Mayores de Edad Avanzada, (TCE, por sus siglas en inglés). Considere sus opciones y elija el que más le convenga.

  7. Use el depósito directo. Combinando e-file con depósito directo (en inglés) es la forma más rápida y segura de obtener su reembolso de impuestos.

  8. Visite el sitio web del IRS 24/7. IRS.gov es un gran lugar para conseguir todo lo que necesita para presentar su declaración de impuestos. Visite la Central 1040 (en inglés) para las herramientas en línea, consejos de presentación, respuestas a las preguntas más frecuentes y los formularios y publicaciones del IRS. Obténgalos todos en cualquier momento, de día o de noche.

  9. Dele un vistazo al número 17. La Publicación 17SP, Sus Impuestos Federales por Ingresos, es un recurso completo en materia tributaria. Contiene información útil como por ejemplo,  si necesita presentar una declaración de impuestos y cómo elegir su estado civil al declarar.

  10. Revise su declaración. Los errores retrasan el recibir su reembolso de impuestos. Asegúrese de revisar todos los números de Seguro Social y los cálculos matemáticos en su declaración, ya que estos son los errores más comunes. Si surge un problema, recuerde que el IRS está aquí para ayudar. Comience con IRS.gov.

 

Recursos adicionales del IRS:

Vídeos de YouTube del IRS:

Podcasts del IRS:

 

Page Last Reviewed or Updated: 27-Mar-2014

The H And R Block File Free

H and r block file free 1. H and r block file free   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. H and r block file free Amount realized on a recourse debt. H and r block file free Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. H and r block file free S. H and r block file free Individual Income Tax Return 1040X Amended U. H and r block file free S. H and r block file free Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. H and r block file free However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. H and r block file free See chapter 5 for information about getting publications and forms. H and r block file free Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. H and r block file free An exchange is a transfer of property for other property or services. H and r block file free The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. H and r block file free Sale or lease. H and r block file free    Some agreements that seem to be leases may really be conditional sales contracts. H and r block file free The intention of the parties to the agreement can help you distinguish between a sale and a lease. H and r block file free   There is no test or group of tests to prove what the parties intended when they made the agreement. H and r block file free You should consider each agreement based on its own facts and circumstances. H and r block file free For more information, see chapter 3 in Publication 535, Business Expenses. H and r block file free Cancellation of a lease. H and r block file free    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. H and r block file free Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. H and r block file free Copyright. H and r block file free    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. H and r block file free It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. H and r block file free Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. H and r block file free   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. H and r block file free For more information, see Section 1231 Gains and Losses in chapter 3. H and r block file free Easement. H and r block file free   The amount received for granting an easement is subtracted from the basis of the property. H and r block file free If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. H and r block file free If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. H and r block file free   Any amount received that is more than the basis to be reduced is a taxable gain. H and r block file free The transaction is reported as a sale of property. H and r block file free   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. H and r block file free However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. H and r block file free   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. H and r block file free Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. H and r block file free See Gain or Loss From Condemnations, later. H and r block file free Property transferred to satisfy debt. H and r block file free   A transfer of property to satisfy a debt is an exchange. H and r block file free Note's maturity date extended. H and r block file free   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. H and r block file free Also, it is not considered a closed and completed transaction that would result in a gain or loss. H and r block file free However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. H and r block file free Each case must be determined by its own facts. H and r block file free For more information, see Regulations section 1. H and r block file free 1001-3. H and r block file free Transfer on death. H and r block file free   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. H and r block file free No taxable gain or deductible loss results from the transfer. H and r block file free Bankruptcy. H and r block file free   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. H and r block file free Consequently, the transfer generally does not result in gain or loss. H and r block file free For more information, see Publication 908, Bankruptcy Tax Guide. H and r block file free Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. H and r block file free A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. H and r block file free A loss is the adjusted basis of the property that is more than the amount you realize. H and r block file free   Table 1-1. H and r block file free How To Figure Whether You Have a Gain or Loss IF your. H and r block file free . H and r block file free . H and r block file free THEN you have a. H and r block file free . H and r block file free . H and r block file free Adjusted basis is more than the amount realized, Loss. H and r block file free Amount realized is more than the adjusted basis, Gain. H and r block file free Basis. H and r block file free   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. H and r block file free The basis of property you buy is usually its cost. H and r block file free However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. H and r block file free See Basis Other Than Cost in Publication 551, Basis of Assets. H and r block file free Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. H and r block file free See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. H and r block file free Adjusted basis. H and r block file free   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. H and r block file free Increases include costs of any improvements having a useful life of more than 1 year. H and r block file free Decreases include depreciation and casualty losses. H and r block file free For more details and additional examples, see Adjusted Basis in Publication 551. H and r block file free Amount realized. H and r block file free   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. H and r block file free The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. H and r block file free Fair market value. H and r block file free   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. H and r block file free If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. H and r block file free If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. H and r block file free Example. H and r block file free You used a building in your business that cost you $70,000. H and r block file free You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. H and r block file free You sold the building for $100,000 plus property having an FMV of $20,000. H and r block file free The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. H and r block file free The selling expenses were $4,000. H and r block file free Your gain on the sale is figured as follows. H and r block file free Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. H and r block file free   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. H and r block file free Recognized gains must be included in gross income. H and r block file free Recognized losses are deductible from gross income. H and r block file free However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. H and r block file free See Nontaxable Exchanges, later. H and r block file free Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. H and r block file free Interest in property. H and r block file free   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. H and r block file free If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. H and r block file free Your basis in the property is disregarded. H and r block file free This rule does not apply if all interests in the property are disposed of at the same time. H and r block file free Example 1. H and r block file free Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. H and r block file free You decide to sell your life interest in the farm. H and r block file free The entire amount you receive is a recognized gain. H and r block file free Your basis in the farm is disregarded. H and r block file free Example 2. H and r block file free The facts are the same as in Example 1, except that your brother joins you in selling the farm. H and r block file free The entire interest in the property is sold, so your basis in the farm is not disregarded. H and r block file free Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. H and r block file free Canceling a sale of real property. H and r block file free   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. H and r block file free If the buyer returns the property in the year of sale, no gain or loss is recognized. H and r block file free This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. H and r block file free If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. H and r block file free When the property is returned in a later year, you acquire a new basis in the property. H and r block file free That basis is equal to the amount you pay to the buyer. H and r block file free Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. H and r block file free You have a gain if the amount realized is more than your adjusted basis in the property. H and r block file free However, you do not have a loss if the amount realized is less than the adjusted basis of the property. H and r block file free Bargain sales to charity. H and r block file free   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. H and r block file free If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. H and r block file free The adjusted basis of the part sold is figured as follows. H and r block file free Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. H and r block file free This allocation rule does not apply if a charitable contribution deduction is not allowable. H and r block file free   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. H and r block file free Example. H and r block file free You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. H and r block file free Your adjusted basis in the property is $4,000. H and r block file free Your gain on the sale is $1,200, figured as follows. H and r block file free Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. H and r block file free You must subtract depreciation you took or could have taken from the basis of the business or rental part. H and r block file free However, see the special rule below for a home used partly for business or rental. H and r block file free You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. H and r block file free Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. H and r block file free Any gain on the personal part of the property is a capital gain. H and r block file free You cannot deduct a loss on the personal part. H and r block file free Home used partly for business or rental. H and r block file free    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. H and r block file free See Property Used Partly for Business or Rental, in Publication 523. H and r block file free Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. H and r block file free You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. H and r block file free However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. H and r block file free Figure the loss you can deduct as follows. H and r block file free Use the lesser of the property's adjusted basis or fair market value at the time of the change. H and r block file free Add to (1) the cost of any improvements and other increases to basis since the change. H and r block file free Subtract from (2) depreciation and any other decreases to basis since the change. H and r block file free Subtract the amount you realized on the sale from the result in (3). H and r block file free If the amount you realized is more than the result in (3), treat this result as zero. H and r block file free The result in (4) is the loss you can deduct. H and r block file free Example. H and r block file free You changed your main home to rental property 5 years ago. H and r block file free At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. H and r block file free This year, you sold the property for $55,000. H and r block file free You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. H and r block file free Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. H and r block file free Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. H and r block file free   If you have a gain on the sale, you generally must recognize the full amount of the gain. H and r block file free You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. H and r block file free   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. H and r block file free However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. H and r block file free   For more information, see Business Use or Rental of Home in Publication 523. H and r block file free In addition, special rules apply if the home sold was acquired in a like-kind exchange. H and r block file free See Special Situations in Publication 523. H and r block file free Also see Like-Kind Exchanges, later. H and r block file free Abandonments The abandonment of property is a disposition of property. H and r block file free You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. H and r block file free Generally, abandonment is not treated as a sale or exchange of the property. H and r block file free If the amount you realize (if any) is more than your adjusted basis, then you have a gain. H and r block file free If your adjusted basis is more than the amount you realize (if any), then you have a loss. H and r block file free Loss from abandonment of business or investment property is deductible as a loss. H and r block file free A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. H and r block file free This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. H and r block file free If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. H and r block file free The abandonment loss is deducted in the tax year in which the loss is sustained. H and r block file free If the abandoned property is secured by debt, special rules apply. H and r block file free The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). H and r block file free For more information, including examples, see chapter 3 of Publication 4681. H and r block file free You cannot deduct any loss from abandonment of your home or other property held for personal use only. H and r block file free Cancellation of debt. H and r block file free   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. H and r block file free This income is separate from any loss realized from abandonment of the property. H and r block file free   You must report this income on your tax return unless one of the following applies. H and r block file free The cancellation is intended as a gift. H and r block file free The debt is qualified farm debt. H and r block file free The debt is qualified real property business debt. H and r block file free You are insolvent or bankrupt. H and r block file free The debt is qualified principal residence indebtedness. H and r block file free File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. H and r block file free For more information, including other exceptions and exclusion, see Publication 4681. H and r block file free Forms 1099-A and 1099-C. H and r block file free   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. H and r block file free However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. H and r block file free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. H and r block file free For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. H and r block file free Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. H and r block file free The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. H and r block file free This is true even if you voluntarily return the property to the lender. H and r block file free You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. H and r block file free Buyer's (borrower's) gain or loss. H and r block file free   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. H and r block file free The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. H and r block file free See Gain or Loss From Sales and Exchanges, earlier. H and r block file free You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. H and r block file free Amount realized on a nonrecourse debt. H and r block file free   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. H and r block file free The full canceled debt is included even if the fair market value of the property is less than the canceled debt. H and r block file free Example 1. H and r block file free Chris bought a new car for $15,000. H and r block file free He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. H and r block file free Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. H and r block file free The credit company repossessed the car because he stopped making loan payments. H and r block file free The balance due after taking into account the payments Chris made was $10,000. H and r block file free The fair market value of the car when repossessed was $9,000. H and r block file free The amount Chris realized on the repossession is $10,000. H and r block file free That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. H and r block file free Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). H and r block file free He has a $5,000 nondeductible loss. H and r block file free Example 2. H and r block file free Abena paid $200,000 for her home. H and r block file free She paid $15,000 down and borrowed the remaining $185,000 from a bank. H and r block file free Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. H and r block file free The bank foreclosed on the loan because Abena stopped making payments. H and r block file free When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. H and r block file free The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. H and r block file free She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). H and r block file free She has a $5,000 realized gain. H and r block file free Amount realized on a recourse debt. H and r block file free   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. H and r block file free You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. H and r block file free The amount realized does not include the canceled debt that is your income from cancellation of debt. H and r block file free See Cancellation of debt, below. H and r block file free Seller's (lender's) gain or loss on repossession. H and r block file free   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. H and r block file free For more information, see Repossession in Publication 537. H and r block file free    Table 1-2. H and r block file free Worksheet for Foreclosures and Repossessions Part 1. H and r block file free Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. H and r block file free Complete this part only  if you were personally liable for the debt. H and r block file free Otherwise,  go to Part 2. H and r block file free   1. H and r block file free Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. H and r block file free Enter the fair market value of the transferred property   3. H and r block file free Ordinary income from cancellation of debt upon foreclosure or    repossession. H and r block file free * Subtract line 2 from line 1. H and r block file free   If less than zero, enter zero   Part 2. H and r block file free Figure your gain or loss from foreclosure or repossession. H and r block file free   4. H and r block file free If you completed Part 1, enter the smaller of line 1 or line 2. H and r block file free   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. H and r block file free Enter any proceeds you received from the foreclosure sale   6. H and r block file free Add lines 4 and 5   7. H and r block file free Enter the adjusted basis of the transferred property   8. H and r block file free Gain or loss from foreclosure or repossession. H and r block file free Subtract line 7  from line 6   * The income may not be taxable. H and r block file free See Cancellation of debt. H and r block file free Cancellation of debt. H and r block file free   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. H and r block file free This income is separate from any gain or loss realized from the foreclosure or repossession. H and r block file free Report the income from cancellation of a debt related to a business or rental activity as business or rental income. H and r block file free    You can use Table 1-2 to figure your income from cancellation of debt. H and r block file free   You must report this income on your tax return unless one of the following applies. H and r block file free The cancellation is intended as a gift. H and r block file free The debt is qualified farm debt. H and r block file free The debt is qualified real property business debt. H and r block file free You are insolvent or bankrupt. H and r block file free The debt is qualified principal residence indebtedness. H and r block file free File Form 982 to report the income exclusion. H and r block file free Example 1. H and r block file free Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). H and r block file free In this case, the amount he realizes is $9,000. H and r block file free This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). H and r block file free Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). H and r block file free He has a $6,000 nondeductible loss. H and r block file free He also is treated as receiving ordinary income from cancellation of debt. H and r block file free That income is $1,000 ($10,000 − $9,000). H and r block file free This is the part of the canceled debt not included in the amount realized. H and r block file free Example 2. H and r block file free Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). H and r block file free In this case, the amount she realizes is $170,000. H and r block file free This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). H and r block file free Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). H and r block file free She has a $5,000 nondeductible loss. H and r block file free She also is treated as receiving ordinary income from cancellation of debt. H and r block file free (The debt is not exempt from tax as discussed under Cancellation of debt, above. H and r block file free ) That income is $10,000 ($180,000 − $170,000). H and r block file free This is the part of the canceled debt not included in the amount realized. H and r block file free Forms 1099-A and 1099-C. H and r block file free   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. H and r block file free However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. H and r block file free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. H and r block file free For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. H and r block file free Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. H and r block file free Involuntary conversions are also called involuntary exchanges. H and r block file free Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. H and r block file free You report the gain or deduct the loss on your tax return for the year you realize it. H and r block file free You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. H and r block file free However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. H and r block file free Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. H and r block file free Your basis for the new property is the same as your basis for the converted property. H and r block file free This means that the gain is deferred until a taxable sale or exchange occurs. H and r block file free If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. H and r block file free This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. H and r block file free If you have a gain or loss from the destruction or theft of property, see Publication 547. H and r block file free Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. H and r block file free The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. H and r block file free The owner receives a condemnation award (money or property) in exchange for the property taken. H and r block file free A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. H and r block file free Example. H and r block file free A local government authorized to acquire land for public parks informed you that it wished to acquire your property. H and r block file free After the local government took action to condemn your property, you went to court to keep it. H and r block file free But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. H and r block file free This is a condemnation of private property for public use. H and r block file free Threat of condemnation. H and r block file free   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. H and r block file free You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. H and r block file free   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. H and r block file free If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. H and r block file free Reports of condemnation. H and r block file free   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. H and r block file free You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. H and r block file free If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. H and r block file free Example. H and r block file free Your property lies along public utility lines. H and r block file free The utility company has the authority to condemn your property. H and r block file free The company informs you that it intends to acquire your property by negotiation or condemnation. H and r block file free A threat of condemnation exists when you receive the notice. H and r block file free Related property voluntarily sold. H and r block file free   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. H and r block file free A substantial economic relationship exists if together the properties were one economic unit. H and r block file free You also must show that the condemned property could not reasonably or adequately be replaced. H and r block file free You can elect to postpone reporting the gain by buying replacement property. H and r block file free See Postponement of Gain, later. H and r block file free Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. H and r block file free If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. H and r block file free You can postpone reporting gain from a condemnation if you buy replacement property. H and r block file free If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. H and r block file free See Postponement of Gain, later. H and r block file free If your net condemnation award is less than your adjusted basis, you have a loss. H and r block file free If your loss is from property you held for personal use, you cannot deduct it. H and r block file free You must report any deductible loss in the tax year it happened. H and r block file free You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. H and r block file free Main home condemned. H and r block file free   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. H and r block file free You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). H and r block file free For information on this exclusion, see Publication 523. H and r block file free If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. H and r block file free See Postponement of Gain, later. H and r block file free Table 1-3. H and r block file free Worksheet for Condemnations Part 1. H and r block file free Gain from severance damages. H and r block file free  If you did not receive severance damages, skip Part 1 and go to Part 2. H and r block file free   1. H and r block file free Enter gross severance damages received   2. H and r block file free Enter your expenses in getting severance damages   3. H and r block file free Subtract line 2 from line 1. H and r block file free If less than zero, enter -0-   4. H and r block file free Enter any special assessment on remaining property taken out of your award   5. H and r block file free Net severance damages. H and r block file free Subtract line 4 from line 3. H and r block file free If less than zero, enter -0-   6. H and r block file free Enter the adjusted basis of the remaining property   7. H and r block file free Gain from severance damages. H and r block file free Subtract line 6 from line 5. H and r block file free If less than zero, enter -0-   8. H and r block file free Refigured adjusted basis of the remaining property. H and r block file free Subtract line 5 from line 6. H and r block file free If less than zero, enter -0-   Part 2. H and r block file free Gain or loss from condemnation award. H and r block file free   9. H and r block file free Enter the gross condemnation award received   10. H and r block file free Enter your expenses in getting the condemnation award   11. H and r block file free If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. H and r block file free If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. H and r block file free Otherwise, enter -0-   12. H and r block file free Add lines 10 and 11   13. H and r block file free Net condemnation award. H and r block file free Subtract line 12 from line 9   14. H and r block file free Enter the adjusted basis of the condemned property   15. H and r block file free Gain from condemnation award. H and r block file free If line 14 is more than line 13, enter -0-. H and r block file free Otherwise, subtract line 14 from  line 13 and skip line 16   16. H and r block file free Loss from condemnation award. H and r block file free Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. H and r block file free )   Part 3. H and r block file free Postponed gain from condemnation. H and r block file free  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. H and r block file free )   17. H and r block file free If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. H and r block file free Otherwise, enter -0-   18. H and r block file free If line 15 is more than zero, enter the amount from line 13. H and r block file free Otherwise, enter -0-   19. H and r block file free Add lines 17 and 18. H and r block file free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. H and r block file free Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. H and r block file free Subtract line 20 from line 19. H and r block file free If less than zero, enter -0-   22. H and r block file free If you completed Part 1, add lines 7 and 15. H and r block file free Otherwise, enter the amount from line 15. H and r block file free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. H and r block file free Recognized gain. H and r block file free Enter the smaller of line 21 or line 22. H and r block file free   24. H and r block file free Postponed gain. H and r block file free Subtract line 23 from line 22. H and r block file free If less than zero, enter -0-   Condemnation award. H and r block file free   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. H and r block file free The award is also the amount you are paid for the sale of your property under threat of condemnation. H and r block file free Payment of your debts. H and r block file free   Amounts taken out of the award to pay your debts are considered paid to you. H and r block file free Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. H and r block file free Example. H and r block file free The state condemned your property for public use. H and r block file free The award was set at $200,000. H and r block file free The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. H and r block file free You are considered to have received the entire $200,000 as a condemnation award. H and r block file free Interest on award. H and r block file free   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. H and r block file free You must report the interest separately as ordinary income. H and r block file free Payments to relocate. H and r block file free   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. H and r block file free Do not include them in your income. H and r block file free Replacement housing payments used to buy new property are included in the property's basis as part of your cost. H and r block file free Net condemnation award. H and r block file free   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. H and r block file free If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. H and r block file free This is discussed later under Special assessment taken out of award. H and r block file free Severance damages. H and r block file free    Severance damages are not part of the award paid for the property condemned. H and r block file free They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. H and r block file free   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. H and r block file free Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. H and r block file free   The contracting parties should agree on the specific amount of severance damages in writing. H and r block file free If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. H and r block file free   You cannot make a completely new allocation of the total award after the transaction is completed. H and r block file free However, you can show how much of the award both parties intended for severance damages. H and r block file free The severance damages part of the award is determined from all the facts and circumstances. H and r block file free Example. H and r block file free You sold part of your property to the state under threat of condemnation. H and r block file free The contract you and the condemning authority signed showed only the total purchase price. H and r block file free It did not specify a fixed sum for severance damages. H and r block file free However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. H and r block file free You may treat this part as severance damages. H and r block file free Treatment of severance damages. H and r block file free   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. H and r block file free Use them to reduce the basis of the remaining property. H and r block file free If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. H and r block file free   If your net severance damages are more than the basis of your retained property, you have a gain. H and r block file free You may be able to postpone reporting the gain. H and r block file free See Postponement of Gain, later. H and r block file free    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. H and r block file free Net severance damages. H and r block file free   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. H and r block file free You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. H and r block file free The balance is your net severance damages. H and r block file free Expenses of obtaining a condemnation award and severance damages. H and r block file free   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. H and r block file free Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. H and r block file free If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. H and r block file free Example. H and r block file free You receive a condemnation award and severance damages. H and r block file free One-fourth of the total was designated as severance damages in your agreement with the condemning authority. H and r block file free You had legal expenses for the entire condemnation proceeding. H and r block file free You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. H and r block file free You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. H and r block file free Special assessment retained out of award. H and r block file free   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. H and r block file free An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. H and r block file free Examples of improvements that may cause a special assessment are widening a street and installing a sewer. H and r block file free   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. H and r block file free Example. H and r block file free To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. H and r block file free You were awarded $5,000 for this and spent $300 to get the award. H and r block file free Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. H and r block file free The city then paid you only $4,300. H and r block file free Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). H and r block file free If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). H and r block file free The net award would not change, even if you later paid the assessment from the amount you received. H and r block file free Severance damages received. H and r block file free   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. H and r block file free Any balance of the special assessment is used to reduce the condemnation award. H and r block file free Example. H and r block file free You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. H and r block file free You spent $300 to obtain the severance damages. H and r block file free A special assessment of $800 was retained out of the award. H and r block file free The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. H and r block file free Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. H and r block file free Part business or rental. H and r block file free   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. H and r block file free Figure your gain or loss separately because gain or loss on each part may be treated differently. H and r block file free   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. H and r block file free Example. H and r block file free You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. H and r block file free You rented half the building and lived in the other half. H and r block file free You paid $25,000 for the building and spent an additional $1,000 for a new roof. H and r block file free You claimed allowable depreciation of $4,600 on the rental half. H and r block file free You spent $200 in legal expenses to obtain the condemnation award. H and r block file free Figure your gain or loss as follows. H and r block file free     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. H and r block file free Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. H and r block file free Your basis for the new property is the same as your basis for the old. H and r block file free Money or unlike property received. H and r block file free   You ordinarily must report the gain if you receive money or unlike property. H and r block file free You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. H and r block file free You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. H and r block file free See Controlling interest in a corporation, later. H and r block file free   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. H and r block file free If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. H and r block file free   The basis of the replacement property is its cost, reduced by the postponed gain. H and r block file free Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. H and r block file free See Controlling interest in a corporation, later. H and r block file free You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. H and r block file free Postponing gain on severance damages. H and r block file free   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. H and r block file free See Treatment of severance damages, earlier. H and r block file free You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). H and r block file free   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. H and r block file free If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. H and r block file free   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. H and r block file free Postponing gain on the sale of related property. H and r block file free   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. H and r block file free You must meet the requirements explained earlier under Related property voluntarily sold. H and r block file free You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). H and r block file free Buying replacement property from a related person. H and r block file free   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. H and r block file free For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. H and r block file free   This rule applies to the following taxpayers. H and r block file free C corporations. H and r block file free Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. H and r block file free All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. H and r block file free   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. H and r block file free If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. H and r block file free If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. H and r block file free Exception. H and r block file free   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. H and r block file free Advance payment. H and r block file free   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). H and r block file free Replacement property. H and r block file free   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. H and r block file free You do not have to use the actual funds from the condemnation award to acquire the replacement property. H and r block file free Property you acquire by gift or inheritance does not qualify as replacement property. H and r block file free Similar or related in service or use. H and r block file free   Your replacement property must be similar or related in service or use to the property it replaces. H and r block file free   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. H and r block file free For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. H and r block file free Owner-user. H and r block file free   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. H and r block file free Example. H and r block file free Your home was condemned and you invested the proceeds from the condemnation in a grocery store. H and r block file free Your replacement property is not similar or related in service or use to the condemned property. H and r block file free To be similar or related in service or use, your replacement property must also be used by you as your home. H and r block file free Owner-investor. H and r block file free   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. H and r block file free You decide this by determining all the following information. H and r block file free Whether the properties are of similar service to you. H and r block file free The nature of the business risks connected with the properties. H and r block file free What the properties demand of you in the way of management, service, and relations to your tenants. H and r block file free Example. H and r block file free You owned land and a building you rented to a manufacturing company. H and r block file free The building was condemned. H and r block file free During the replacement period, you had a new building built on other land you already owned. H and r block file free You rented out the new building for use as a wholesale grocery warehouse. H and r block file free The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. H and r block file free Your management activities. H and r block file free The amount and kind of services you provide to your tenants. H and r block file free The nature of your business risks connected with the properties. H and r block file free Leasehold replaced with fee simple property. H and r block file free   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. H and r block file free   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. H and r block file free A leasehold is property held under a lease, usually for a term of years. H and r block file free Outdoor advertising display replaced with real property. H and r block file free   You can elect to treat an outdoor advertising display as real property. H and r block file free If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. H and r block file free For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. H and r block file free   You can make this election only if you did not claim a section 179 deduction for the display. H and r block file free You cannot cancel this election unless you get the consent of the IRS. H and r block file free   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. H and r block file free Substituting replacement property. H and r block file free   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. H and r block file free But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. H and r block file free Controlling interest in a corporation. H and r block file free   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. H and r block file free You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. H and r block file free Basis adjustment to corporation's property. H and r block file free   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. H and r block file free You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). H and r block file free   Allocate this reduction to the following classes of property in the order shown below. H and r block file free Property that is similar or related in service or use to the condemned property. H and r block file free Depreciable property not reduced in (1). H and r block file free All other property. H and r block file free If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. H and r block file free The reduced basis of any single property cannot be less than zero. H and r block file free Main home replaced. H and r block file free   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. H and r block file free The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. H and r block file free   You must reduce the basis of your replacement property by the postponed gain. H and r block file free Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. H and r block file free Example. H and r block file free City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. H and r block file free The city paid you a condemnation award of $400,000. H and r block file free Your adjusted basis in the property was $80,000. H and r block file free You realize a gain of $320,000 ($400,000 − $80,000). H and r block file free You purchased a new home for $100,000. H and r block file free You can exclude $250,000 of the realized gain from your gross income. H and r block file free The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). H and r block file free You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). H and r block file free The remaining $20,000 of realized gain is postponed. H and r block file free Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). H and r block file free Replacement period. H and r block file free   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. H and r block file free This is the replacement period. H and r block file free   The replacement period for a condemnation begins on the earlier of the following dates. H and r block file free The date on which you disposed of the condemned property. H and r block file free The date on which the threat of condemnation began. H and r block file free   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. H and r block file free However, see the exceptions below. H and r block file free Three-year replacement period for certain property. H and r block file free   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. H and r block file free However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. H and r block file free Five-year replacement period for certain property. H and r block file free   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. H and r block file free Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. H and r block file free Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. H and r block file free Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. H and r block file free Extended replacement period for taxpayers affected by other federally declared disasters. H and r block file free    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. H and r block file free For more information visit www. H and r block file free irs. H and r block file free gov/uac/Tax-Relief-in-Disaster-Situations. H and r block file free Weather-related sales of livestock in an area eligible for federal assistance. H and r block file free   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. H and r block file free    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. H and r block file free See Notice 2006-82. H and r block file free You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. H and r block file free irs. H and r block file free gov/irb/2006-39_IRB/ar13. H and r block file free html. H and r block file free    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. H and r block file free If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. H and r block file free You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. H and r block file free irs. H and r block file free gov/irb/2013-45_IRB/ar04. H and r block file free html. H and r block file free The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. H and r block file free Determining when gain is realized. H and r block file free   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. H and r block file free If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. H and r block file free   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. H and r block file free A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. H and r block file free   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. H and r block file free All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. H and r block file free All or part of the award is actually or constructively received. H and r block file free For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. H and r block file free Replacement property bought before the condemnation. H and r block file free   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. H and r block file free Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. H and r block file free Example. H and r block file free On April 3, 2012, city authorities notified you that your property would be condemned. H and r block file free On June 5, 2012, you acquired property to replace the property to be condemned. H and r block file free You still had the new property when the city took possession of your old property on September 4, 2013. H and r block file free You have made a replacement within the replacement period. H and r block file free Extension. H and r block file free   You can request an extension of the replacement period from the IRS director for your area. H and r block file free You should apply before the end of the replacement period. H and r block file free Your request should explain in detail why you need an extension. H and r block file free The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. H and r block file free An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. H and r block file free   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. H and r block file free Extensions are usually limited to a period of 1 year or less. H and r block file free The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. H and r block file free If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri