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H&r Block 2011 Tax Software

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H&r Block 2011 Tax Software

H&r block 2011 tax software 3. H&r block 2011 tax software   Exclusions From Gross Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident AliensForeign Earned Income and Housing Amount Nonresident AliensInterest Income Dividend Income Services Performed for Foreign Employer Gambling Winnings From Dog or Horse Racing Gain From the Sale of Your Main Home Scholarships and Fellowship GrantsExpenses that do not qualify. H&r block 2011 tax software Introduction Resident and nonresident aliens are allowed exclusions from gross income if they meet certain conditions. H&r block 2011 tax software An exclusion from gross income is generally income you receive that is not included in your U. H&r block 2011 tax software S. H&r block 2011 tax software income and is not subject to U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software This chapter covers some of the more common exclusions allowed to resident and nonresident aliens. H&r block 2011 tax software Topics - This chapter discusses: Nontaxable interest, Nontaxable dividends, Certain compensation paid by a foreign employer, Gain from sale of home, and Scholarships and fellowship grants. H&r block 2011 tax software Useful Items - You may want to see: Publication 54 Tax Guide for U. H&r block 2011 tax software S. H&r block 2011 tax software Citizens and Resident Aliens Abroad 523 Selling Your Home See chapter 12 for information about getting these publications. H&r block 2011 tax software Resident Aliens Resident aliens may be able to exclude the following items from their gross income. H&r block 2011 tax software Foreign Earned Income and Housing Amount If you are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months, you may qualify for the foreign earned income exclusion. H&r block 2011 tax software The exclusion is $97,600 in 2013. H&r block 2011 tax software In addition, you may be able to exclude or deduct certain foreign housing amounts. H&r block 2011 tax software You may also qualify if you are a bona fide resident of a foreign country and you are a citizen or national of a country with which the United States has an income tax treaty. H&r block 2011 tax software For more information, see Publication 54. H&r block 2011 tax software Foreign country. H&r block 2011 tax software    A foreign country is any territory under the sovereignty of a government other than that of the United States. H&r block 2011 tax software   The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. H&r block 2011 tax software It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. H&r block 2011 tax software   The term “foreign country” does not include U. H&r block 2011 tax software S. H&r block 2011 tax software possessions or territories. H&r block 2011 tax software It does not include the Antarctic region. H&r block 2011 tax software Nonresident Aliens Nonresident aliens can exclude the following items from their gross income. H&r block 2011 tax software Interest Income Interest income that is not connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business, Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and Amounts held by an insurance company under an agreement to pay interest on them. H&r block 2011 tax software State and local government obligations. H&r block 2011 tax software   Interest on obligations of a state or political subdivision, the District of Columbia, or a U. H&r block 2011 tax software S. H&r block 2011 tax software possession, generally is not included in income. H&r block 2011 tax software However, interest on certain private activity bonds, arbitrage bonds, and certain bonds not in registered form is included in income. H&r block 2011 tax software Portfolio interest. H&r block 2011 tax software   Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. H&r block 2011 tax software To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. H&r block 2011 tax software Note. H&r block 2011 tax software For obligations issued after March 18, 2012, portfolio interest does not include interest paid on debt that is not in registered form. H&r block 2011 tax software Before March 19, 2012, portfolio interest included interest on certain registered and nonregistered (bearer) bonds if the obligations meet the requirements described below. H&r block 2011 tax software Obligations in registered form. H&r block 2011 tax software   Portfolio interest includes interest paid on an obligation that is in registered form, and for which you have received documentation that the beneficial owner of the obligation is not a United States person. H&r block 2011 tax software   Generally, an obligation is in registered form if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or its agent) and any transfer of the obligation may be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the right to principal and stated interest with respect to the obligation may be transferred only through a book entry system maintained by the issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest with the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system. H&r block 2011 tax software   An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular time if it can be converted at any time in the future into an obligation that is not in registered form. H&r block 2011 tax software For more information on whether obligations are considered to be in registered form, see Portfolio interest in Publication 515. H&r block 2011 tax software Obligations not in registered form. H&r block 2011 tax software    For obligations issued before March 19, 2012, interest on an obligation that is not in registered form (bearer obligation) is portfolio interest if the obligation is foreign-targeted. H&r block 2011 tax software A bearer obligation is foreign-targeted if: There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person, Interest on the obligation is payable only outside the United States and its possessions, and The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws. H&r block 2011 tax software   Documentation is not required for interest on bearer obligations to qualify as portfolio interest. H&r block 2011 tax software In some cases, however, you may need documentation for purposes of Form 1099 reporting and backup withholding. H&r block 2011 tax software Interest that does not qualify as portfolio interest. H&r block 2011 tax software   Payments to certain persons and payments of contingent interest do not qualify as portfolio interest. H&r block 2011 tax software You must withhold at the statutory rate on such payments unless some other exception, such as a treaty provision, applies. H&r block 2011 tax software Contingent interest. H&r block 2011 tax software   Portfolio interest does not include contingent interest. H&r block 2011 tax software Contingent interest is either of the following: Interest that is determined by reference to: Any receipts, sales, or other cash flow of the debtor or related person, Income or profits of the debtor or related person, Any change in value of any property of the debtor or a related person, or Any dividend, partnership distributions, or similar payments made by the debtor or a related person. H&r block 2011 tax software For exceptions, see Internal Revenue Code section 871(h)(4)(C). H&r block 2011 tax software Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations. H&r block 2011 tax software Related persons. H&r block 2011 tax software   Related persons include the following. H&r block 2011 tax software Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. H&r block 2011 tax software ), and lineal descendants (children, grandchildren, etc. H&r block 2011 tax software ). H&r block 2011 tax software Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules. H&r block 2011 tax software Certain corporations, partnerships, and other entities. H&r block 2011 tax software For details, see Nondeductible Loss in chapter 2 of Publication 544. H&r block 2011 tax software Exception for existing debt. H&r block 2011 tax software   Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued: On or before April 7, 1993, or After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued. H&r block 2011 tax software Dividend Income The following dividend income is exempt from the 30% tax. H&r block 2011 tax software Certain dividends paid by foreign corporations. H&r block 2011 tax software   There is no 30% tax on U. H&r block 2011 tax software S. H&r block 2011 tax software source dividends you receive from a foreign corporation. H&r block 2011 tax software See Second exception under Dividends in chapter 2 for how to figure the amount of U. H&r block 2011 tax software S. H&r block 2011 tax software source dividends. H&r block 2011 tax software Certain interest-related dividends. H&r block 2011 tax software   There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company in 2013. H&r block 2011 tax software The mutual fund will designate in writing which dividends are interest-related dividends. H&r block 2011 tax software Certain short-term capital gain dividends. H&r block 2011 tax software   There may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive from a mutual fund or other regulated investment company. H&r block 2011 tax software The mutual fund will designate in writing which dividends are short-term capital gain dividends. H&r block 2011 tax software This tax relief will not apply to you if you are present in the United States for 183 days or more during your tax year. H&r block 2011 tax software Services Performed for Foreign Employer If you were paid by a foreign employer, your U. H&r block 2011 tax software S. H&r block 2011 tax software source income may be exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software tax, but only if you meet one of the situations discussed next. H&r block 2011 tax software Employees of foreign persons, organizations, or offices. H&r block 2011 tax software   Income for personal services performed in the United States as a nonresident alien is not considered to be from U. H&r block 2011 tax software S. H&r block 2011 tax software sources and is tax exempt if you meet all three of the following conditions. H&r block 2011 tax software You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U. H&r block 2011 tax software S. H&r block 2011 tax software corporation, a U. H&r block 2011 tax software S. H&r block 2011 tax software partnership, or a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen or resident. H&r block 2011 tax software You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. H&r block 2011 tax software Your pay for these services is not more than $3,000. H&r block 2011 tax software If you do not meet all three conditions, your income from personal services performed in the United States is U. H&r block 2011 tax software S. H&r block 2011 tax software source income and is taxed according to the rules in chapter 4. H&r block 2011 tax software   If your pay for these services is more than $3,000, the entire amount is income from a trade or business within the United States. H&r block 2011 tax software To find if your pay is more than $3,000, do not include any amounts you get from your employer for advances or reimbursements of business travel expenses, if you were required to and did account to your employer for those expenses. H&r block 2011 tax software If the advances or reimbursements are more than your expenses, include the excess in your pay for these services. H&r block 2011 tax software   A day means a calendar day during any part of which you are physically present in the United States. H&r block 2011 tax software Example 1. H&r block 2011 tax software During 2013, Henry Smythe, a nonresident alien from a nontreaty country, worked for an overseas office of a U. H&r block 2011 tax software S. H&r block 2011 tax software partnership. H&r block 2011 tax software Henry, who uses the calendar year as his tax year, was temporarily present in the United States for 60 days during 2013 performing personal services for the overseas office of the partnership. H&r block 2011 tax software That office paid him a total gross salary of $2,800 for those services. H&r block 2011 tax software During 2013, he was not engaged in a trade or business in the United States. H&r block 2011 tax software The salary is not considered U. H&r block 2011 tax software S. H&r block 2011 tax software source income and is exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software Example 2. H&r block 2011 tax software The facts are the same as in Example 1, except that Henry's total gross salary for the services performed in the United States during 2013 was $4,500. H&r block 2011 tax software He received $2,875 in 2013, and $1,625 in 2014. H&r block 2011 tax software During 2013, he was engaged in a trade or business in the United States because the compensation for his personal services in the United States was more than $3,000. H&r block 2011 tax software Henry's salary is U. H&r block 2011 tax software S. H&r block 2011 tax software source income and is taxed under the rules in chapter 4. H&r block 2011 tax software Crew members. H&r block 2011 tax software   Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U. H&r block 2011 tax software S. H&r block 2011 tax software possession is not U. H&r block 2011 tax software S. H&r block 2011 tax software source income and is exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software This exemption does not apply to compensation for services performed on foreign aircraft. H&r block 2011 tax software Students and exchange visitors. H&r block 2011 tax software   Nonresident alien students and exchange visitors present in the United States under “F,” “J,” or “Q” visas can exclude from gross income pay received from a foreign employer. H&r block 2011 tax software   This group includes bona fide students, scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a field of specialized knowledge or skill, or persons of similar description. H&r block 2011 tax software It also includes the alien's spouse and minor children if they come with the alien or come later to join the alien. H&r block 2011 tax software   A nonresident alien temporarily present in the United States under a “J” visa includes an alien individual entering the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. H&r block 2011 tax software Foreign employer. H&r block 2011 tax software   A foreign employer is: A nonresident alien individual, foreign partnership, or foreign corporation, or An office or place of business maintained in a foreign country or in a U. H&r block 2011 tax software S. H&r block 2011 tax software possession by a U. H&r block 2011 tax software S. H&r block 2011 tax software corporation, a U. H&r block 2011 tax software S. H&r block 2011 tax software partnership, or an individual who is a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen or resident. H&r block 2011 tax software   The term “foreign employer” does not include a foreign government. H&r block 2011 tax software Pay from a foreign government that is exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software income tax is discussed in chapter 10. H&r block 2011 tax software Income from certain annuities. H&r block 2011 tax software   Do not include in income any annuity received under a qualified annuity plan or from a qualified trust exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software income tax if you meet both of the following conditions. H&r block 2011 tax software You receive the annuity only because: You performed personal services outside the United States while you were a nonresident alien, or You performed personal services inside the United States while you were a nonresident alien and you met the three conditions, described earlier, under Employees of foreign persons, organizations, or offices . H&r block 2011 tax software At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U. H&r block 2011 tax software S. H&r block 2011 tax software citizens or residents. H&r block 2011 tax software   If the annuity qualifies under condition (1) but not condition (2) above, you do not have to include the amount in income if: You are a resident of a country that gives a substantially equal exclusion to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens and residents, or You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974. H&r block 2011 tax software   If you are not sure whether the annuity is from a qualified annuity plan or qualified trust, ask the person who made the payment. H&r block 2011 tax software Income affected by treaties. H&r block 2011 tax software   Income of any kind that is exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software tax under a treaty to which the United States is a party is excluded from your gross income. H&r block 2011 tax software Income on which the tax is only limited by treaty, however, is included in gross income. H&r block 2011 tax software See chapter 9. H&r block 2011 tax software Gambling Winnings From Dog or Horse Racing You can exclude from your gross income winnings from legal wagers initiated outside the United States in a parimutuel pool with respect to a live horse or dog race in the United States. H&r block 2011 tax software Gain From the Sale of Your Main Home If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale of your home. H&r block 2011 tax software If you are married and file a joint return, you may be able to exclude up to $500,000. H&r block 2011 tax software For information on the requirements for this exclusion, see Publication 523. H&r block 2011 tax software This exclusion does not apply to nonresident aliens who are subject to the expatriation tax rules discussed in chapter 4. H&r block 2011 tax software Scholarships and Fellowship Grants If you are a candidate for a degree, you may be able to exclude from your income part or all of the amounts you receive as a qualified scholarship. H&r block 2011 tax software The rules discussed here apply to both resident and nonresident aliens. H&r block 2011 tax software If a nonresident alien receives a grant that is not from U. H&r block 2011 tax software S. H&r block 2011 tax software sources, it is not subject to U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U. H&r block 2011 tax software S. H&r block 2011 tax software sources. H&r block 2011 tax software A scholarship or fellowship is excludable from income only if: You are a candidate for a degree at an eligible educational institution, and You use the scholarship or fellowship to pay qualified education expenses. H&r block 2011 tax software Candidate for a degree. H&r block 2011 tax software   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. H&r block 2011 tax software Eligible educational institution. H&r block 2011 tax software   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. H&r block 2011 tax software Qualified education expenses. H&r block 2011 tax software   These are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. H&r block 2011 tax software These items must be required of all students in your course of instruction. H&r block 2011 tax software However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. H&r block 2011 tax software Expenses that do not qualify. H&r block 2011 tax software   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. H&r block 2011 tax software This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. H&r block 2011 tax software Scholarship or fellowship amounts used to pay these costs are taxable. H&r block 2011 tax software Amounts used to pay expenses that do not qualify. H&r block 2011 tax software   A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance. H&r block 2011 tax software Payment for services. H&r block 2011 tax software   You cannot exclude from income the portion of any scholarship, fellowship, or tuition reduction that represents payment for past, present, or future teaching, research, or other services. H&r block 2011 tax software This is true even if all candidates for a degree are required to perform the services as a condition for receiving the degree. H&r block 2011 tax software Example. H&r block 2011 tax software On January 7, Maria Gomez is notified of a scholarship of $2,500 for the spring semester. H&r block 2011 tax software As a condition for receiving the scholarship, Maria must serve as a part-time teaching assistant. H&r block 2011 tax software Of the $2,500 scholarship, $1,000 represents payment for her services. H&r block 2011 tax software Assuming that Maria meets all other conditions, she can exclude no more than $1,500 from income as a qualified scholarship. H&r block 2011 tax software Prev  Up  Next   Home   More Online Publications
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The H&r Block 2011 Tax Software

H&r block 2011 tax software 7. H&r block 2011 tax software   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. H&r block 2011 tax software Costs not included. H&r block 2011 tax software Intangible Drilling Costs Exploration CostsPartnerships and S corporations. H&r block 2011 tax software Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. H&r block 2011 tax software Film and Television Production Costs What's New Film and television productions costs. H&r block 2011 tax software  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. H&r block 2011 tax software See Film and Television Production Costs , later. H&r block 2011 tax software Introduction This chapter discusses costs you can elect to deduct or capitalize. H&r block 2011 tax software You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. H&r block 2011 tax software If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. H&r block 2011 tax software When you capitalize a cost, you add it to the basis of property to which it relates. H&r block 2011 tax software A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. H&r block 2011 tax software Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. H&r block 2011 tax software You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. H&r block 2011 tax software For more information on the alternative minimum tax, see the instructions for the following forms. H&r block 2011 tax software Form 6251, Alternative Minimum Tax—Individuals. H&r block 2011 tax software Form 4626, Alternative Minimum Tax—Corporations. H&r block 2011 tax software Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. H&r block 2011 tax software Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. H&r block 2011 tax software Certain carrying charges must be capitalized under the uniform capitalization rules. H&r block 2011 tax software (For information on capitalization of interest, see chapter 4 . H&r block 2011 tax software ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. H&r block 2011 tax software You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. H&r block 2011 tax software For unimproved and unproductive real property, your election is good for only 1 year. H&r block 2011 tax software You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. H&r block 2011 tax software For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. H&r block 2011 tax software For personal property, your election is effective until the date you install or first use it, whichever is later. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. H&r block 2011 tax software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Attach the statement to the amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2” on the statement. H&r block 2011 tax software File the amended return at the same address you filed the original return. H&r block 2011 tax software Research and Experimental Costs The costs of research and experimentation are generally capital expenses. H&r block 2011 tax software However, you can elect to deduct these costs as a current business expense. H&r block 2011 tax software Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. H&r block 2011 tax software If you meet certain requirements, you may elect to defer and amortize research and experimental costs. H&r block 2011 tax software For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. H&r block 2011 tax software Research and experimental costs defined. H&r block 2011 tax software   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. H&r block 2011 tax software Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. H&r block 2011 tax software Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. H&r block 2011 tax software      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. H&r block 2011 tax software However, costs paid or incurred to obtain another's patent are not research and experimental costs. H&r block 2011 tax software Product. H&r block 2011 tax software   The term “product” includes any of the following items. H&r block 2011 tax software Formula. H&r block 2011 tax software Invention. H&r block 2011 tax software Patent. H&r block 2011 tax software Pilot model. H&r block 2011 tax software Process. H&r block 2011 tax software Technique. H&r block 2011 tax software Property similar to the items listed above. H&r block 2011 tax software It also includes products used by you in your trade or business or held for sale, lease, or license. H&r block 2011 tax software Costs not included. H&r block 2011 tax software   Research and experimental costs do not include expenses for any of the following activities. H&r block 2011 tax software Advertising or promotions. H&r block 2011 tax software Consumer surveys. H&r block 2011 tax software Efficiency surveys. H&r block 2011 tax software Management studies. H&r block 2011 tax software Quality control testing. H&r block 2011 tax software Research in connection with literary, historical, or similar projects. H&r block 2011 tax software The acquisition of another's patent, model, production, or process. H&r block 2011 tax software When and how to elect. H&r block 2011 tax software   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. H&r block 2011 tax software If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. H&r block 2011 tax software Deducting or Amortizing Research and Experimentation Costs IF you . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software THEN . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. H&r block 2011 tax software Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. H&r block 2011 tax software See Research and Experimental Costs in chapter 8. H&r block 2011 tax software Research credit. H&r block 2011 tax software   If you pay or incur qualified research expenses, you may be able to take the research credit. H&r block 2011 tax software For more information see Form 6765, Credit for Increasing Research Activities and its instructions. H&r block 2011 tax software Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. H&r block 2011 tax software You can usually recover them through depreciation or depletion. H&r block 2011 tax software However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. H&r block 2011 tax software These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. H&r block 2011 tax software You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. H&r block 2011 tax software You can elect to deduct only the costs of items with no salvage value. H&r block 2011 tax software These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. H&r block 2011 tax software Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. H&r block 2011 tax software However, see Amounts paid to contractor that must be capitalized , later. H&r block 2011 tax software You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. H&r block 2011 tax software It does not matter whether there is any intent to produce hydrocarbons. H&r block 2011 tax software If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. H&r block 2011 tax software Amounts paid to contractor that must be capitalized. H&r block 2011 tax software   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. H&r block 2011 tax software No formal statement is required. H&r block 2011 tax software If you file Schedule C (Form 1040), enter these costs under “Other expenses. H&r block 2011 tax software ”   For oil and gas wells, your election is binding for the year it is made and for all later years. H&r block 2011 tax software For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. H&r block 2011 tax software You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. H&r block 2011 tax software Energy credit for costs of geothermal wells. H&r block 2011 tax software   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. H&r block 2011 tax software See the Instructions for Form 3468 for more information. H&r block 2011 tax software Nonproductive well. H&r block 2011 tax software   If you capitalize your IDCs, you have another option if the well is nonproductive. H&r block 2011 tax software You can deduct the IDCs of the nonproductive well as an ordinary loss. H&r block 2011 tax software You must indicate and clearly state your election on your tax return for the year the well is completed. H&r block 2011 tax software Once made, the election for oil and gas wells is binding for all later years. H&r block 2011 tax software You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. H&r block 2011 tax software Costs incurred outside the United States. H&r block 2011 tax software   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. H&r block 2011 tax software However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. H&r block 2011 tax software If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. H&r block 2011 tax software These rules do not apply to a nonproductive well. H&r block 2011 tax software Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. H&r block 2011 tax software You recover these costs through depletion as the mineral is removed from the ground. H&r block 2011 tax software However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). H&r block 2011 tax software How to make the election. H&r block 2011 tax software   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. H&r block 2011 tax software Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. H&r block 2011 tax software The election applies to the tax year you make this election and all later tax years. H&r block 2011 tax software Partnerships and S corporations. H&r block 2011 tax software   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. H&r block 2011 tax software Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. H&r block 2011 tax software Reduced corporate deductions for exploration costs. H&r block 2011 tax software   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. H&r block 2011 tax software It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. H&r block 2011 tax software A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. H&r block 2011 tax software For more information on this method of amortization, see Internal Revenue Code section 59(e). H&r block 2011 tax software   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. H&r block 2011 tax software However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. H&r block 2011 tax software See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. H&r block 2011 tax software   These rules also apply to the deduction of development costs by corporations. H&r block 2011 tax software See Development Costs , later. H&r block 2011 tax software Recapture of exploration expenses. H&r block 2011 tax software   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. H&r block 2011 tax software Use either of the following methods. H&r block 2011 tax software Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. H&r block 2011 tax software Your election must be clearly indicated on the return. H&r block 2011 tax software Increase your adjusted basis in the mine by the amount included in income. H&r block 2011 tax software Generally, you must elect this recapture method by the due date (including extensions) of your return. H&r block 2011 tax software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Make the election on your amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2” on the form where you are including the income. H&r block 2011 tax software File the amended return at the same address you filed the original return. H&r block 2011 tax software Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. H&r block 2011 tax software   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. H&r block 2011 tax software Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. H&r block 2011 tax software   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. H&r block 2011 tax software Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. H&r block 2011 tax software If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. H&r block 2011 tax software Foreign exploration costs. H&r block 2011 tax software   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. H&r block 2011 tax software You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. H&r block 2011 tax software (Cost depletion is discussed in chapter 9 . H&r block 2011 tax software ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. H&r block 2011 tax software These rules also apply to foreign development costs. H&r block 2011 tax software Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. H&r block 2011 tax software These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. H&r block 2011 tax software Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. H&r block 2011 tax software Development costs do not include the costs for the acquisition or improvement of depreciable property. H&r block 2011 tax software Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. H&r block 2011 tax software This election applies each tax year to expenses paid or incurred in that year. H&r block 2011 tax software Once made, the election is binding for the year and cannot be revoked for any reason. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. H&r block 2011 tax software Generally, you must make the election by the due date of the return (including extensions). H&r block 2011 tax software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2. H&r block 2011 tax software ” File the amended return at the same address you filed the original return. H&r block 2011 tax software Foreign development costs. H&r block 2011 tax software   The rules discussed earlier for foreign exploration costs apply to foreign development costs. H&r block 2011 tax software Reduced corporate deductions for development costs. H&r block 2011 tax software   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. H&r block 2011 tax software Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. H&r block 2011 tax software For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. H&r block 2011 tax software Circulation costs are deductible even if they normally would be capitalized. H&r block 2011 tax software This rule does not apply to the following costs that must be capitalized. H&r block 2011 tax software The purchase of land or depreciable property. H&r block 2011 tax software The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. H&r block 2011 tax software Other treatment of circulation costs. H&r block 2011 tax software   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. H&r block 2011 tax software Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). H&r block 2011 tax software Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. H&r block 2011 tax software Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. H&r block 2011 tax software Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. H&r block 2011 tax software However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. H&r block 2011 tax software The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. H&r block 2011 tax software Any remaining costs must be amortized. H&r block 2011 tax software For information about amortizing start-up and organizational costs, see chapter 8 . H&r block 2011 tax software Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. H&r block 2011 tax software Organizational costs include the costs of creating a corporation. H&r block 2011 tax software For more information on start-up and organizational costs, see chapter 8 . H&r block 2011 tax software How to make the election. H&r block 2011 tax software   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. H&r block 2011 tax software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2. H&r block 2011 tax software ” File the amended return at the same address you filed the original return. H&r block 2011 tax software The election applies when computing taxable income for the current tax year and all subsequent years. H&r block 2011 tax software Reforestation Costs Reforestation costs are generally capital expenditures. H&r block 2011 tax software However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. H&r block 2011 tax software The remaining costs can be amortized over an 84-month period. H&r block 2011 tax software For information about amortizing reforestation costs, see chapter 8 . H&r block 2011 tax software Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. H&r block 2011 tax software Qualified timber property is property that contains trees in significant commercial quantities. H&r block 2011 tax software See chapter 8 for more information on qualifying reforestation costs and qualified timber property. H&r block 2011 tax software If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. H&r block 2011 tax software Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. H&r block 2011 tax software If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. H&r block 2011 tax software If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. H&r block 2011 tax software The unique stand identification numbers. H&r block 2011 tax software The total number of acres reforested during the tax year. H&r block 2011 tax software The nature of the reforestation treatments. H&r block 2011 tax software The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. H&r block 2011 tax software   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2. H&r block 2011 tax software ” File the amended return at the same address you filed the original return. H&r block 2011 tax software The election applies when computing taxable income for the current tax year and all subsequent years. H&r block 2011 tax software   For additional information on reforestation costs, see chapter 8 . H&r block 2011 tax software Recapture. H&r block 2011 tax software   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. H&r block 2011 tax software For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. H&r block 2011 tax software Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. H&r block 2011 tax software However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. H&r block 2011 tax software Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. H&r block 2011 tax software However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. H&r block 2011 tax software You must own or lease the facility or vehicle for use in connection with your trade or business. H&r block 2011 tax software A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. H&r block 2011 tax software A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). H&r block 2011 tax software You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. H&r block 2011 tax software Deduction limit. H&r block 2011 tax software   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. H&r block 2011 tax software However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. H&r block 2011 tax software Partners and partnerships. H&r block 2011 tax software   The $15,000 limit applies to a partnership and also to each partner in the partnership. H&r block 2011 tax software A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. H&r block 2011 tax software If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. H&r block 2011 tax software   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). H&r block 2011 tax software If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. H&r block 2011 tax software Example. H&r block 2011 tax software Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. H&r block 2011 tax software Emilio had $12,000 of similar expenses in his sole proprietorship. H&r block 2011 tax software He elected to deduct $7,000 of them. H&r block 2011 tax software Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. H&r block 2011 tax software Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. H&r block 2011 tax software Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. H&r block 2011 tax software Qualification standards. H&r block 2011 tax software   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. H&r block 2011 tax software You can view the Americans with Disabilities Act at www. H&r block 2011 tax software ada. H&r block 2011 tax software gov/pubs/ada. H&r block 2011 tax software htm. H&r block 2011 tax software   The following is a list of some architectural barrier removal costs that can be deducted. H&r block 2011 tax software Ground and floor surfaces. H&r block 2011 tax software Walks. H&r block 2011 tax software Parking lots. H&r block 2011 tax software Ramps. H&r block 2011 tax software Entrances. H&r block 2011 tax software Doors and doorways. H&r block 2011 tax software Stairs. H&r block 2011 tax software Floors. H&r block 2011 tax software Toilet rooms. H&r block 2011 tax software Water fountains. H&r block 2011 tax software Public telephones. H&r block 2011 tax software Elevators. H&r block 2011 tax software Controls. H&r block 2011 tax software Signage. H&r block 2011 tax software Alarms. H&r block 2011 tax software Protruding objects. H&r block 2011 tax software Symbols of accessibility. H&r block 2011 tax software You can find the ADA guidelines and requirements for architectural barrier removal at www. H&r block 2011 tax software usdoj. H&r block 2011 tax software gov/crt/ada/reg3a. H&r block 2011 tax software html. H&r block 2011 tax software   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. H&r block 2011 tax software You can find the guidelines and requirements for transportation barrier removal at www. H&r block 2011 tax software fta. H&r block 2011 tax software dot. H&r block 2011 tax software gov. H&r block 2011 tax software   Also, you can access the ADA website at www. H&r block 2011 tax software ada. H&r block 2011 tax software gov for additional information. H&r block 2011 tax software Other barrier removals. H&r block 2011 tax software   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. H&r block 2011 tax software The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. H&r block 2011 tax software The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). H&r block 2011 tax software The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. H&r block 2011 tax software How to make the election. H&r block 2011 tax software   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. H&r block 2011 tax software Identify the deduction as a separate item. H&r block 2011 tax software The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. H&r block 2011 tax software If you make this election, you must maintain adequate records to support your deduction. H&r block 2011 tax software   For your election to be valid, you generally must file your return by its due date, including extensions. H&r block 2011 tax software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block 2011 tax software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block 2011 tax software 9100-2. H&r block 2011 tax software ” File the amended return at the same address you filed the original return. H&r block 2011 tax software Your election is irrevocable after the due date, including extensions, of your return. H&r block 2011 tax software Disabled access credit. H&r block 2011 tax software   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. H&r block 2011 tax software If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. H&r block 2011 tax software   For more information, see Form 8826, Disabled Access Credit. H&r block 2011 tax software Film and Television Production Costs Film and television production costs are generally capital expenses. H&r block 2011 tax software However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. H&r block 2011 tax software For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. H&r block 2011 tax software Prev  Up  Next   Home   More Online Publications