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How Do I File Taxes From 2009

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How Do I File Taxes From 2009

How do i file taxes from 2009 Publication 521 - Main Content Table of Contents Who Can Deduct Moving ExpensesMove Related to Start of Work Distance Test Time Test Retirees or Survivors Who Move to the United States Deductible Moving ExpensesMoves to Locations in the United States Moves to Locations Outside the United States Nondeductible Expenses ReimbursementsTypes of Reimbursement Plans Tax Withholding and Estimated Tax How and When To ReportForm 3903 When To Deduct Expenses Illustrated Example Members of the Armed Forces How To Get Tax Help Who Can Deduct Moving Expenses You can deduct your moving expenses if you meet all three of the following requirements. How do i file taxes from 2009 Your move is closely related to the start of work. How do i file taxes from 2009 You meet the distance test. How do i file taxes from 2009 You meet the time test. How do i file taxes from 2009 After you have read these rules, you may want to use Figure B to help you decide if you can deduct your moving expenses. How do i file taxes from 2009 Retirees, survivors, and Armed Forces members. How do i file taxes from 2009   Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States. How do i file taxes from 2009 These rules are discussed later in this publication. How do i file taxes from 2009 Move Related to Start of Work Your move must be closely related, both in time and in place, to the start of work at your new job location. How do i file taxes from 2009 Closely related in time. How do i file taxes from 2009   In most cases, you can consider moving expenses incurred within 1 year from the date you first reported to work at the new location as closely related in time to the start of work. How do i file taxes from 2009 It is not necessary that you arrange to work before moving to a new location, as long as you actually go to work in that location. How do i file taxes from 2009    Figure A. How do i file taxes from 2009 Illustration of Distance Test Please click here for the text description of the image. How do i file taxes from 2009 Figure A   If you do not move within 1 year of the date you begin work, you ordinarily cannot deduct the expenses unless you can show that circumstances existed that prevented the move within that time. How do i file taxes from 2009 Example. How do i file taxes from 2009 Your family moved more than a year after you started work at a new location. How do i file taxes from 2009 You delayed the move for 18 months to allow your child to complete high school. How do i file taxes from 2009 You can deduct your moving expenses. How do i file taxes from 2009 Closely related in place. How do i file taxes from 2009   You can generally consider your move closely related in place to the start of work if the distance from your new home to the new job location is not more than the distance from your former home to the new job location. How do i file taxes from 2009 If your move does not meet this requirement, you may still be able to deduct moving expenses if you can show that: You are required to live at your new home as a condition of your employment, or You will spend less time or money commuting from your new home to your new job location. How do i file taxes from 2009 Home defined. How do i file taxes from 2009   Your home means your main home (residence). How do i file taxes from 2009 It can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. How do i file taxes from 2009 It does not include other homes owned or kept up by you or members of your family. How do i file taxes from 2009 It also does not include a seasonal home, such as a summer beach cottage. How do i file taxes from 2009 Your former home means your home before you left for your new job location. How do i file taxes from 2009 Your new home means your home within the area of your new job location. How do i file taxes from 2009 Retirees or survivors. How do i file taxes from 2009   You may be able to deduct the expenses of moving to the United States or its possessions even though the move is not related to the start of work at a new job location. How do i file taxes from 2009 You must have worked outside the United States or be a survivor of someone who did. How do i file taxes from 2009 See Retirees or Survivors Who Move to the United States, later. How do i file taxes from 2009 Distance Test Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home. How do i file taxes from 2009 For example, if your old main job location was 3 miles from your former home, your new main job location must be at least 53 miles from that former home. How do i file taxes from 2009 You can use Worksheet 1 to see if you meet this test. How do i file taxes from 2009 Worksheet 1. How do i file taxes from 2009 Distance Test   Note. How do i file taxes from 2009 Members of the Armed Forces may not have to meet this test. How do i file taxes from 2009 See Members of the Armed Forces. How do i file taxes from 2009     1. How do i file taxes from 2009 Enter the number of miles from your old home to your new workplace 1. How do i file taxes from 2009 miles 2. How do i file taxes from 2009 Enter the number of miles from your old home to your old workplace 2. How do i file taxes from 2009 miles 3. How do i file taxes from 2009 Subtract line 2 from line 1. How do i file taxes from 2009 If zero or less, enter -0- 3. How do i file taxes from 2009 miles 4. How do i file taxes from 2009 Is line 3 at least 50 miles? □ Yes. How do i file taxes from 2009 You meet this test. How do i file taxes from 2009  □ No. How do i file taxes from 2009 You do not meet this test. How do i file taxes from 2009 You cannot deduct your moving expenses. How do i file taxes from 2009 The distance between a job location and your home is the shortest of the more commonly traveled routes between them. How do i file taxes from 2009 The distance test considers only the location of your former home. How do i file taxes from 2009 It does not take into account the location of your new home. How do i file taxes from 2009 See Figure A, earlier. How do i file taxes from 2009 Example. How do i file taxes from 2009 You moved to a new home less than 50 miles from your former home because you changed main job locations. How do i file taxes from 2009 Your old main job location was 3 miles from your former home. How do i file taxes from 2009 Your new main job location is 60 miles from that home. How do i file taxes from 2009 Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test. How do i file taxes from 2009 First job or return to full-time work. How do i file taxes from 2009   If you go to work full time for the first time, your place of work must be at least 50 miles from your former home to meet the distance test. How do i file taxes from 2009   If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home. How do i file taxes from 2009 Armed Forces. How do i file taxes from 2009   If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. How do i file taxes from 2009 See Members of the Armed Forces, later. How do i file taxes from 2009 Main job location. How do i file taxes from 2009   Your main job location is usually the place where you spend most of your working time. How do i file taxes from 2009 This could be your office, plant, store, shop, or other location. How do i file taxes from 2009 If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. How do i file taxes from 2009 Union members. How do i file taxes from 2009   If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall. How do i file taxes from 2009 More than one job. How do i file taxes from 2009   If you have more than one job at any time, your main job location depends on the facts in each case. How do i file taxes from 2009 The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. How do i file taxes from 2009    Table 1. How do i file taxes from 2009 Satisfying the Time Test for Employees and Self-Employed Persons IF you are. How do i file taxes from 2009 . How do i file taxes from 2009 . How do i file taxes from 2009 THEN you satisfy the time test by meeting the. How do i file taxes from 2009 . How do i file taxes from 2009 . How do i file taxes from 2009 an employee 39-week test for employees. How do i file taxes from 2009 self-employed 78-week test for self-employed persons. How do i file taxes from 2009 both self-employed and an employee at the same time 78-week test for a self-employed person or the 39-week  test for an employee. How do i file taxes from 2009 Your principal place of work  determines which test applies. How do i file taxes from 2009 both self-employed and an employee, but unable to satisfy the 39-week test for employees 78-week test for self-employed persons. How do i file taxes from 2009 Time Test To deduct your moving expenses, you also must meet one of the following two time tests. How do i file taxes from 2009 The time test for employees. How do i file taxes from 2009 The time test for self-employed persons. How do i file taxes from 2009 Both of these tests are explained below. How do i file taxes from 2009 See Table 1, below, for a summary of these tests. How do i file taxes from 2009 You can deduct your moving expenses before you meet either of the time tests. How do i file taxes from 2009 See Time Test Not Yet Met, later. How do i file taxes from 2009 Time Test for Employees If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location (39-week test). How do i file taxes from 2009 Full-time employment depends on what is usual for your type of work in your area. How do i file taxes from 2009 For purposes of this test, the following four rules apply. How do i file taxes from 2009 You count only your full-time work as an employee, not any work you do as a self-employed person. How do i file taxes from 2009 You do not have to work for the same employer for all 39 weeks. How do i file taxes from 2009 You do not have to work 39 weeks in a row. How do i file taxes from 2009 You must work full time within the same general commuting area for all 39 weeks. How do i file taxes from 2009 Temporary absence from work. How do i file taxes from 2009   You are considered to have worked full time during any week you are temporarily absent from work because of illness, strikes, lockouts, layoffs, natural disasters, or similar causes. How do i file taxes from 2009 You are also considered to have worked full time during any week you are absent from work for leave or vacation provided for in your work contract or agreement. How do i file taxes from 2009 Seasonal work. How do i file taxes from 2009   If your work is seasonal, you are considered to be working full time during the off-season only if your work contract or agreement covers an off-season period of less than 6 months. How do i file taxes from 2009 For example, a school teacher on a 12-month contract who teaches on a full-time basis for more than 6 months is considered to have worked full time for the entire 12 months. How do i file taxes from 2009    Figure B. How do i file taxes from 2009 Can You Deduct Expenses for a Non-Military Move Within the United States? Please click here for the text description of the image. How do i file taxes from 2009 Figure B Time Test for Self-Employed Persons If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location (78-week test). How do i file taxes from 2009 For purposes of the time test for self-employed persons, the following three rules apply. How do i file taxes from 2009 You count any full-time work you do either as an employee or as a self-employed person. How do i file taxes from 2009 You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks. How do i file taxes from 2009 You must work within the same general commuting area for all 78 weeks. How do i file taxes from 2009 Example. How do i file taxes from 2009 You are a self-employed accountant who moves from Atlanta to New York City, and begin to work there on December 1, 2013. How do i file taxes from 2009 You pay moving expenses in 2013 and 2014 in connection with this move. How do i file taxes from 2009 On April 15, 2014, when you file your income tax return for the year 2013, you have been performing services as a self-employed individual on a full-time basis in New York City for approximately 20 weeks. How do i file taxes from 2009 Although you have not satisfied the 78-week employment condition at this time, you can deduct your 2013 moving expenses on your 2013 income tax return as there is still sufficient time remaining before December 1, 2015, to satisfy such condition. How do i file taxes from 2009 You can deduct any moving expenses you pay in 2014 on your 2014 income tax return even if you have not met the 78-week test. How do i file taxes from 2009 You have until December 1, 2015, to satisfy this requirement. How do i file taxes from 2009 Self-employment. How do i file taxes from 2009   You are self-employed if you work as the sole owner of an unincorporated business or as a partner in a partnership carrying on a business. How do i file taxes from 2009 You are not considered self-employed if you are semi-retired, are a part-time student, or work only a few hours each week. How do i file taxes from 2009 Full-time work. How do i file taxes from 2009   You can count only those weeks during which you work full time as a week of work. How do i file taxes from 2009 Whether you work full time during any week depends on what is usual for your type of work in your area. How do i file taxes from 2009 For example, you are a self-employed dentist and maintain office hours 4 days a week. How do i file taxes from 2009 You are considered to perform services full time if maintaining office hours 4 days a week is not unusual for other self-employed dentists in your area. How do i file taxes from 2009 Temporary absence from work. How do i file taxes from 2009   You are considered to be self-employed on a full-time basis during any week you are temporarily absent from work because of illness, strikes, natural disasters, or similar causes. How do i file taxes from 2009 Seasonal trade or business. How do i file taxes from 2009   If your trade or business is seasonal, the off-season weeks when no work is required or available may be counted as weeks during which you worked full time. How do i file taxes from 2009 The off-season must be less than 6 months and you must work full time before and after the off-season. How do i file taxes from 2009 Example. How do i file taxes from 2009 You own and operate a motel at a beach resort. How do i file taxes from 2009 The motel is closed for 5 months during the off-season. How do i file taxes from 2009 You work full time as the operator of the motel before and after the off-season. How do i file taxes from 2009 You are considered self-employed on a full-time basis during the weeks of the off-season. How do i file taxes from 2009   If you were both an employee and self-employed, see Table 1 earlier, for the requirements. How do i file taxes from 2009 Example. How do i file taxes from 2009 Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and L Cabinet Shop. How do i file taxes from 2009 He generally worked at the shop about 40 hours each week. How do i file taxes from 2009 Shortly after the move, Justin also began operating a cabinet-installation business from his home for several hours each afternoon and all day on weekends. How do i file taxes from 2009 Because Justin's principal place of business is the cabinet shop, he can satisfy the time test by meeting the 39-week test. How do i file taxes from 2009    If Justin is unable to satisfy the requirements of the 39-week test during the 12-month period immediately following his arrival in the general location of his new principal place of work, he can satisfy the 78-week test. How do i file taxes from 2009 Joint Return If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. How do i file taxes from 2009 However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test. How do i file taxes from 2009 Time Test Not Yet Met You can deduct your moving expenses on your 2013 tax return even though you have not met the time test by the date your 2013 return is due. How do i file taxes from 2009 You can do this if you expect to meet the 39-week test in 2014 or the 78-week test in 2014 or 2015. How do i file taxes from 2009 If you do not deduct your moving expenses on your 2013 return, and you later meet the time test, you can file an amended return for 2013 to take the deduction. How do i file taxes from 2009 See When To Deduct Expenses later, for more details. How do i file taxes from 2009 Failure to meet the time test. How do i file taxes from 2009    If you deduct moving expenses but do not meet the time test in 2014 or 2015, you must either: Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. How do i file taxes from 2009 Example. How do i file taxes from 2009 You arrive in the general area of your new job location, as an employee, on September 15, 2013. How do i file taxes from 2009 You deduct your moving expenses on your 2013 return, the year of the move, even though you have not yet met the time test by the date your return is due. How do i file taxes from 2009 If you do not meet the 39-week test during the 12-month period following your arrival in the general area of your new job location, you must either: Report your moving expense deduction as other income on your Form 1040 for 2014, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. How do i file taxes from 2009 Exceptions to the Time Test You do not have to meet the time test if one of the following applies. How do i file taxes from 2009 You are in the Armed Forces and you moved because of a permanent change of station. How do i file taxes from 2009 See Members of the Armed Forces , later. How do i file taxes from 2009 Your main job location was outside the United States and you moved to the United States because you retired. How do i file taxes from 2009 See Retirees or Survivors Who Move to the United States, later. How do i file taxes from 2009 You are the survivor of a person whose main job location at the time of death was outside the United States. How do i file taxes from 2009 See Retirees or Survivors Who Move to the United States, later. How do i file taxes from 2009 Your job at the new location ends because of death or disability. How do i file taxes from 2009 You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. How do i file taxes from 2009 For this exception, you must have obtained full-time employment and you must have expected to meet the test at the time you started the job. How do i file taxes from 2009 Retirees or Survivors Who Move to the United States If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test, discussed earlier. How do i file taxes from 2009 However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad. How do i file taxes from 2009 If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move. How do i file taxes from 2009 United States defined. How do i file taxes from 2009   For this section of this publication, the term “United States” includes the possessions of the United States. How do i file taxes from 2009 Retirees who were working abroad. How do i file taxes from 2009   You can deduct moving expenses for a move to a new home in the United States when you permanently retire. How do i file taxes from 2009 However, both your former main job location and your former home must have been outside the United States. How do i file taxes from 2009 Permanently retired. How do i file taxes from 2009   You are considered permanently retired when you cease gainful full-time employment or self-employment. How do i file taxes from 2009 If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. How do i file taxes from 2009 Your intention to retire permanently may be determined by: Your age and health, The customary retirement age for people who do similar work, Whether you receive retirement payments from a pension or retirement fund, and The length of time before you return to full-time work. How do i file taxes from 2009 Decedents. How do i file taxes from 2009   Qualified deductible moving expenses are allowed on a final return (Form 1040 or 1040NR) when a taxpayer has moved and dies within the same calendar year. How do i file taxes from 2009 The personal representative filing on behalf of that taxpayer should complete and attach Form 3903 to the final return. How do i file taxes from 2009   A personal representative can be an executor, administrator, or anyone who is in charge of the deceased person's property. How do i file taxes from 2009 For more information, see Publication 559, Survivors, Executors, and Administrators. How do i file taxes from 2009 Survivors of decedents who were working abroad. How do i file taxes from 2009   If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met. How do i file taxes from 2009 The move is to a home in the United States. How do i file taxes from 2009 The move begins within 6 months after the decedent's death. How do i file taxes from 2009 (When a move begins is described below. How do i file taxes from 2009 ) The move is from the decedent's former home. How do i file taxes from 2009 The decedent's former home was outside the United States. How do i file taxes from 2009 The decedent's former home was also your home. How do i file taxes from 2009 When a move begins. How do i file taxes from 2009   A move begins when one of the following events occurs. How do i file taxes from 2009 You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time. How do i file taxes from 2009 Your household goods and personal effects are packed and on the way to your home in the United States. How do i file taxes from 2009 You leave your former home to travel to your new home in the United States. How do i file taxes from 2009 Deductible Moving Expenses If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of: Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and Traveling (including lodging but not meals) to your new home. How do i file taxes from 2009 You cannot deduct any expenses for meals. How do i file taxes from 2009 Reasonable expenses. How do i file taxes from 2009   You can deduct only those expenses that are reasonable for the circumstances of your move. How do i file taxes from 2009 For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. How do i file taxes from 2009 If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses. How do i file taxes from 2009 Example. How do i file taxes from 2009 Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. How do i file taxes from 2009 On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. How do i file taxes from 2009 Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. How do i file taxes from 2009 Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. How do i file taxes from 2009 Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing. How do i file taxes from 2009 Travel by car. How do i file taxes from 2009   If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either: Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or The standard mileage rate of 24 cents per mile. How do i file taxes from 2009 Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct the parking fees and tolls you pay to move. How do i file taxes from 2009 You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car. How do i file taxes from 2009 Member of your household. How do i file taxes from 2009   You can deduct moving expenses you pay for yourself and members of your household. How do i file taxes from 2009 A member of your household is anyone who has both your former and new home as his or her home. How do i file taxes from 2009 It does not include a tenant or employee, unless that person is your dependent. How do i file taxes from 2009 Moves to Locations in the United States If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. How do i file taxes from 2009 Your move may be from one U. How do i file taxes from 2009 S. How do i file taxes from 2009 location to another or from a foreign country to the United States. How do i file taxes from 2009 Household goods and personal effects. How do i file taxes from 2009   You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. How do i file taxes from 2009 For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. How do i file taxes from 2009   If you use your own car to move your things, see Travel by car, earlier. How do i file taxes from 2009   You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. How do i file taxes from 2009   You can deduct the cost of shipping your car and your household pets to your new home. How do i file taxes from 2009   You can deduct the cost of moving your household goods and personal effects from a place other than your former home. How do i file taxes from 2009 Your deduction is limited to the amount it would have cost to move them from your former home. How do i file taxes from 2009 Example. How do i file taxes from 2009 Paul Brown has been living and working in North Carolina for the last 4 years. How do i file taxes from 2009 Because he has been renting a small apartment, he stored some furniture at his parents' home in Georgia. How do i file taxes from 2009 Paul got a job in Washington, DC. How do i file taxes from 2009 It cost him $900 to move the furniture from his North Carolina apartment to Washington and $3,000 to move the stored furniture from Georgia to Washington. How do i file taxes from 2009 It would have cost $1,800 to ship the stored furniture from North Carolina to Washington. How do i file taxes from 2009 He can deduct only $1,800 of the $3,000 he paid. How do i file taxes from 2009 The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800). How do i file taxes from 2009 You cannot deduct the cost of moving furniture you buy on the way to your new home. How do i file taxes from 2009   Storage expenses. How do i file taxes from 2009   You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. How do i file taxes from 2009 Travel expenses. How do i file taxes from 2009   You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. How do i file taxes from 2009 This includes expenses for the day you arrive. How do i file taxes from 2009    The day of arrival is the day you secure lodging at the new place of residence, even if the lodging is on a temporary basis. How do i file taxes from 2009   You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved. How do i file taxes from 2009   The members of your household do not have to travel together or at the same time. How do i file taxes from 2009 However, you can only deduct expenses for one trip per person. How do i file taxes from 2009 If you use your own car, see Travel by car, earlier. How do i file taxes from 2009 Example. How do i file taxes from 2009   In February 2013, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. How do i file taxes from 2009 Josh drove the family car to Washington, DC, a trip of 1,100 miles. How do i file taxes from 2009 His expenses were $264. How do i file taxes from 2009 00 for mileage (1,100 miles x 24 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $454. How do i file taxes from 2009 00. How do i file taxes from 2009 One week later, Robyn flew from Minneapolis to Washington, DC. How do i file taxes from 2009 Her only expense was her $400 plane ticket. How do i file taxes from 2009 The Blacks' deduction is $854. How do i file taxes from 2009 00 (Josh's $454. How do i file taxes from 2009 00 + Robyn's $400). How do i file taxes from 2009 Moves to Locations Outside the United States To deduct expenses for a move outside the United States, you must move to the area of a new place of work outside the United States and its possessions. How do i file taxes from 2009 You must meet the requirements under Who Can Deduct Moving Expenses , earlier. How do i file taxes from 2009 Deductible expenses. How do i file taxes from 2009   If your move is to a location outside the United States and its possessions, you can deduct the following expenses. How do i file taxes from 2009 The cost of moving household goods and personal effects from your former home to your new home. How do i file taxes from 2009 The cost of traveling (including lodging) from your former home to your new home. How do i file taxes from 2009 The cost of moving household goods and personal effects to and from storage. How do i file taxes from 2009 The cost of storing household goods and personal effects while you are at the new job location. How do i file taxes from 2009 The first two items were explained earlier under Moves to Locations in the United States . How do i file taxes from 2009 The last two items are discussed, later. How do i file taxes from 2009 Moving goods and effects to and from storage. How do i file taxes from 2009   You can deduct the reasonable expenses of moving your personal effects to and from storage. How do i file taxes from 2009 Storage expenses. How do i file taxes from 2009   You can deduct the reasonable expenses of storing your household goods and personal effects for all or part of the time the new job location remains your main job location. How do i file taxes from 2009 Moving expenses allocable to excluded foreign income. How do i file taxes from 2009   If you live and work outside the United States, you may be able to exclude from income part or all of the income you earn in the foreign country. How do i file taxes from 2009 You may also be able to claim a foreign housing exclusion or deduction. How do i file taxes from 2009 If you claim the foreign earned income or foreign housing exclusion, you cannot deduct the part of your moving expenses that relates to the excluded income. How do i file taxes from 2009    Publication 54, Tax Guide for U. How do i file taxes from 2009 S. How do i file taxes from 2009 Citizens and Resident Aliens Abroad, explains how to figure the part of your moving expenses that relates to excluded income. How do i file taxes from 2009 You can get the publication from most U. How do i file taxes from 2009 S. How do i file taxes from 2009 embassies and consulates, or see How To Get Tax Help at the end of this publication. How do i file taxes from 2009 Nondeductible Expenses You cannot deduct the following items as moving expenses. How do i file taxes from 2009 Any part of the purchase price of your new home. How do i file taxes from 2009 Car tags. How do i file taxes from 2009 Driver's license. How do i file taxes from 2009 Expenses of buying or selling a home (including closing costs, mortgage fees, and points). How do i file taxes from 2009 Expenses of entering into or breaking a lease. How do i file taxes from 2009 Home improvements to help sell your home. How do i file taxes from 2009 Loss on the sale of your home. How do i file taxes from 2009 Losses from disposing of memberships in clubs. How do i file taxes from 2009 Mortgage penalties. How do i file taxes from 2009 Pre-move househunting expenses. How do i file taxes from 2009 Real estate taxes. How do i file taxes from 2009 Refitting of carpet and draperies. How do i file taxes from 2009 Return trips to your former residence. How do i file taxes from 2009 Security deposits (including any given up due to the move). How do i file taxes from 2009 Storage charges except those incurred in transit and for foreign moves. How do i file taxes from 2009 No double deduction. How do i file taxes from 2009   You cannot take a moving expense deduction and a business expense deduction for the same expenses. How do i file taxes from 2009 You must decide if your expenses are deductible as moving expenses or as business expenses. How do i file taxes from 2009 For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. How do i file taxes from 2009 In most cases, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less. How do i file taxes from 2009   See Publication 463, Travel, Entertainment, Gift, and Car Expenses, for information on deducting your business expenses. How do i file taxes from 2009 Reimbursements This section explains how to report a reimbursement (including advances and allowances) on your tax return. How do i file taxes from 2009 It covers reimbursements for any of your moving expenses discussed in this publication. How do i file taxes from 2009 It also explains the types of reimbursements on which your employer must withhold income, social security, and Medicare taxes. How do i file taxes from 2009 Types of Reimbursement Plans If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. How do i file taxes from 2009 For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later. How do i file taxes from 2009 Your employer should tell you what method of reimbursement is used and what records are required. How do i file taxes from 2009 Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. How do i file taxes from 2009 Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. How do i file taxes from 2009 Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home. How do i file taxes from 2009 You must adequately account to your employer for these expenses within a reasonable period of time. How do i file taxes from 2009 You must return any excess reimbursement or allowance within a reasonable period of time. How do i file taxes from 2009 Adequate accounting. How do i file taxes from 2009   You adequately account for your moving expenses by giving your employer documentation of those expenses, such as a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it. How do i file taxes from 2009 Documentation includes receipts, canceled checks, and bills. How do i file taxes from 2009 Reasonable period of time. How do i file taxes from 2009   What constitutes a “reasonable period of time” depends on the facts and circumstances of your situation. How do i file taxes from 2009 However, regardless of the facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. How do i file taxes from 2009 You receive an advance within 30 days of the time you have an expense. How do i file taxes from 2009 You adequately account for your expenses within 60 days after they were paid or incurred. How do i file taxes from 2009 You return any excess reimbursement within 120 days after the expense was paid or incurred. How do i file taxes from 2009 You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. How do i file taxes from 2009 Excess reimbursement. How do i file taxes from 2009   This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that you adequately accounted for to your employer within a reasonable period of time. How do i file taxes from 2009 Returning excess reimbursements. How do i file taxes from 2009   You must be required to return any excess reimbursement for your moving expenses to the person paying the reimbursement. How do i file taxes from 2009 Excess reimbursement includes any amount for which you did not adequately account within a reasonable period of time. How do i file taxes from 2009 For example, if you received an advance and you did not spend all the money on deductible moving expenses, or you do not have proof of all your expenses, you have an excess reimbursement. How do i file taxes from 2009 You meet accountable plan rules. How do i file taxes from 2009   If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. How do i file taxes from 2009 Instead, your employer should include the reimbursements in box 12 of your Form W-2. How do i file taxes from 2009 Example. How do i file taxes from 2009 You lived in Boston and accepted a job in Atlanta. How do i file taxes from 2009 Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta. How do i file taxes from 2009 Your employer will include the reimbursement on your Form W-2, box 12, with Code P. How do i file taxes from 2009 If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later). How do i file taxes from 2009 You do not meet accountable plan rules. How do i file taxes from 2009   You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses. How do i file taxes from 2009   If your deductible expenses are reimbursed under an otherwise accountable plan but you do not return, within a reasonable period, any reimbursement of expenses for which you did not adequately account, then only the amount for which you did adequately account is considered as paid under an accountable plan. How do i file taxes from 2009 The remaining expenses are treated as having been reimbursed under a nonaccountable plan (discussed below). How do i file taxes from 2009 Reimbursement of nondeductible expenses. How do i file taxes from 2009   You may be reimbursed by your employer for moving expenses, some of which are deductible expenses and some of which are not deductible. How do i file taxes from 2009 The reimbursements you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are treated as paid under a nonaccountable plan (see below) and are included in your income. How do i file taxes from 2009 If you are reimbursed by your employer for the taxes you must pay (including social security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement as well, and it is treated as paid under a nonaccountable plan. How do i file taxes from 2009 Nonaccountable Plans A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans. How do i file taxes from 2009 In addition, the following payments will be treated as paid under a nonaccountable plan. How do i file taxes from 2009 Excess reimbursements you fail to return to your employer. How do i file taxes from 2009 Reimbursements of nondeductible expenses. How do i file taxes from 2009 See Reimbursement of nondeductible expenses, earlier. How do i file taxes from 2009 If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. How do i file taxes from 2009 This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses. How do i file taxes from 2009 If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer. How do i file taxes from 2009 Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. How do i file taxes from 2009 Your employer will report the total in box 1 of your Form W-2. How do i file taxes from 2009 Example. How do i file taxes from 2009 To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. How do i file taxes from 2009 Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as income in box 1 of your Form W-2. How do i file taxes from 2009 Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 Do not include in income any moving expense payment you received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. How do i file taxes from 2009 These payments are made to persons displaced from their homes, businesses, or farms by federal projects. How do i file taxes from 2009 Tax Withholding and Estimated Tax Your employer must withhold income, social security, and Medicare taxes from reimbursements and allowances paid to you that are included in your income. How do i file taxes from 2009 See Reimbursements included in income, later. How do i file taxes from 2009 Reimbursements excluded from income. How do i file taxes from 2009   Your employer should not include in your wages reimbursements paid under an accountable plan (explained earlier) for moving expenses that you: Could deduct if you had paid or incurred them, and Did not deduct in an earlier year. How do i file taxes from 2009 These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. How do i file taxes from 2009 Your employer should report these reimbursements on your Form W-2, box 12, with Code P. How do i file taxes from 2009    You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income (see Accountable Plans under Types of Reimbursement Plans, earlier). How do i file taxes from 2009 Expenses deducted in earlier year. How do i file taxes from 2009   If you receive a reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement in income on Form 1040, line 21. How do i file taxes from 2009 Your employer should show the amount of your reimbursement in box 12 of your Form W-2. How do i file taxes from 2009 Reimbursements included in income. How do i file taxes from 2009   Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. How do i file taxes from 2009 See Nonaccountable Plans under Types of Reimbursement Plans, earlier. How do i file taxes from 2009 Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. How do i file taxes from 2009 This includes amounts your employer reimbursed you under an accountable plan (explained earlier) for meals, househunting trips, and real estate expenses. How do i file taxes from 2009 It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer. How do i file taxes from 2009 Reimbursement for deductible and nondeductible expenses. How do i file taxes from 2009    If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. How do i file taxes from 2009 Your employer must treat any remaining amount as taxable wages and withhold income, social security, and Medicare taxes. How do i file taxes from 2009 Amount of income tax withheld. How do i file taxes from 2009   If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. How do i file taxes from 2009 It depends in part on whether income tax is withheld from your regular wages, on whether the reimbursements and allowances are added to your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate. How do i file taxes from 2009   Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances in your regular wages. How do i file taxes from 2009 The employer can withhold income tax on supplemental wages at a flat rate which may be different from your regular tax rate. How do i file taxes from 2009 Estimated tax. How do i file taxes from 2009    If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. How do i file taxes from 2009 For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax. How do i file taxes from 2009 How and When To Report This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your move. How do i file taxes from 2009 For a quick overview, see Table 2, later. How do i file taxes from 2009 Form 3903 Use Form 3903 to figure your moving expense deduction. How do i file taxes from 2009 Use a separate Form 3903 for each move for which you are deducting expenses. How do i file taxes from 2009 Do not file Form 3903 if all of the following apply. How do i file taxes from 2009 You moved to a location outside the United States in an earlier year. How do i file taxes from 2009 You are claiming only storage fees while you were away from the United States. How do i file taxes from 2009 Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2. How do i file taxes from 2009 Instead, enter the storage fees (after the reduction for the part that is allocable to excluded income) on Form 1040, line 26, and enter “Storage” on the dotted line next to the amount. How do i file taxes from 2009 If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under Members of the Armed Forces, later. How do i file taxes from 2009 Completing Form 3903. How do i file taxes from 2009   Complete Worksheet 1, earlier, or the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the distance test. How do i file taxes from 2009 If so, complete lines 1 through 3 of the form using your actual expenses (except, if you use your own car, you can figure expenses based on the standard mileage rate, instead of actual amounts for gas and oil). How do i file taxes from 2009 Enter on line 4 the total amount of your moving expense reimbursement that was excluded from your wages. How do i file taxes from 2009 This excluded amount should be identified on Form W-2, box 12, with code P. How do i file taxes from 2009 Expenses greater than reimbursement. How do i file taxes from 2009   If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. How do i file taxes from 2009 This is your moving expense deduction. How do i file taxes from 2009 Expenses equal to or less than reimbursement. How do i file taxes from 2009    If line 3 is equal to or less than line 4, you have no moving expense deduction. How do i file taxes from 2009 Subtract line 3 from line 4 and, if the result is more than zero, include it as income on Form 1040, line 7. How do i file taxes from 2009 Table 2. How do i file taxes from 2009 Reporting Your Moving Expenses and Reimbursements IF your Form W-2 shows. How do i file taxes from 2009 . How do i file taxes from 2009 . How do i file taxes from 2009 AND you have. How do i file taxes from 2009 . How do i file taxes from 2009 . How do i file taxes from 2009 THEN. How do i file taxes from 2009 . How do i file taxes from 2009 . How do i file taxes from 2009 your reimbursement reported only  in box 12 with code P moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses* and reimbursements. How do i file taxes from 2009 your reimbursement reported only  in box 12 with code P moving expenses equal to the amount  in box 12 do not file Form 3903. How do i file taxes from 2009 your reimbursement divided  between box 12 and box 1 moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses,* but only the  reimbursements reported in box 12 of  Form W-2. How do i file taxes from 2009 your entire reimbursement reported  as wages in box 1 moving expenses file Form 3903 showing all allowable  expenses,* but do not show any  reimbursements. How do i file taxes from 2009 no reimbursement moving expenses file Form 3903 showing all allowable  expenses. How do i file taxes from 2009 * * See Deductible Moving Expenses, earlier, for allowable expenses. How do i file taxes from 2009    Where to deduct. How do i file taxes from 2009   Deduct your moving expenses on Form 1040, line 26. How do i file taxes from 2009 The amount of moving expenses you can deduct is shown on Form 3903, line 5. How do i file taxes from 2009    You cannot deduct moving expenses on Form 1040EZ or Form 1040A. How do i file taxes from 2009   When To Deduct Expenses You may have a choice of when to deduct your moving expenses. How do i file taxes from 2009 Expenses not reimbursed. How do i file taxes from 2009   If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses. How do i file taxes from 2009 Example. How do i file taxes from 2009 In December 2012, your employer transferred you to another city in the United States, where you still work. How do i file taxes from 2009 You are single and were not reimbursed for your moving expenses. How do i file taxes from 2009 In 2012, you paid for moving your furniture and deducted these expenses on your 2012 tax return. How do i file taxes from 2009 In January 2013, you paid for travel to the new city. How do i file taxes from 2009 You can deduct these additional expenses on your 2013 tax return. How do i file taxes from 2009 Expenses reimbursed. How do i file taxes from 2009   If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. How do i file taxes from 2009 If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year. How do i file taxes from 2009 See Choosing when to deduct, next. How do i file taxes from 2009   If you deduct your expenses and you receive the reimbursement in a later year, you must include the reimbursement in your income on Form 1040, line 21. How do i file taxes from 2009 Choosing when to deduct. How do i file taxes from 2009   If you use the cash method of accounting, which is used by most individuals, you can choose to deduct moving expenses in the year your employer reimburses you if: You paid the expenses in a year before the year of reimbursement, or You paid the expenses in the year immediately after the year of reimbursement but by the due date, including extensions, for filing your return for the reimbursement year. How do i file taxes from 2009 How to make the choice. How do i file taxes from 2009   You choose to deduct moving expenses in the year you received reimbursement by taking the deduction on your return, or amended return, for that year. How do i file taxes from 2009    You cannot deduct any moving expenses for which you received a reimbursement that was not included in your income. How do i file taxes from 2009 Illustrated Example Tom and Peggy Smith are married and have two children. How do i file taxes from 2009 They owned a home in Detroit where Tom worked. How do i file taxes from 2009 On February 8, 2013, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. How do i file taxes from 2009 Peggy flew to San Diego on March 1 to look for a new home. How do i file taxes from 2009 She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. How do i file taxes from 2009 The Smiths sold their Detroit home for $1,500 less than they paid for it. How do i file taxes from 2009 They contracted to have their personal effects moved to San Diego on April 3. How do i file taxes from 2009 The family drove to San Diego where they found that their new home was not finished. How do i file taxes from 2009 They stayed in a nearby motel until the house was ready on May 1. How do i file taxes from 2009 On April 10, Tom went to work in the San Diego plant where he still works. How do i file taxes from 2009 Their records for the move show: 1) Peggy's pre-move househunting  trip:       Travel and lodging   $ 449       Meals   75   $ 524 2) Down payment on San Diego  home 25,000 3) Real estate commission paid on  sale of Detroit home 3,500 4) Loss on sale of Detroit home (not  including real estate commission) 1,500 5) Amount paid for moving personal  effects (furniture, other household  goods, etc. How do i file taxes from 2009 ) 8,000 6) Expenses of driving to San Diego:       Mileage (Start 14,278;  End 16,478) 2,200 miles at 24 cents a mile   $ 528       Lodging   180       Meals   320   1,028 7) Cost of temporary living  expenses in San Diego:       Motel rooms   $1,450       Meals   2,280   3,730 Total $43,282   Tom was reimbursed $10,907 under an accountable plan. How do i file taxes from 2009 His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan. How do i file taxes from 2009 Moving personal effects   $6,800 Travel (and lodging) to San Diego   708 Travel (and lodging) for househunting trip   449 Lodging for temporary quarters   1,450 Loss on sale of home   1,500 Total reimbursement   $10,907 The employer included this reimbursement on Tom's Form W-2 for the year. How do i file taxes from 2009 The reimbursement of allowable expenses, $7,508 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. How do i file taxes from 2009 His employer identified this amount with code P. How do i file taxes from 2009 The employer included the balance, $3,399 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. How do i file taxes from 2009 Tom must include this amount on Form 1040, line 7. How do i file taxes from 2009 The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. How do i file taxes from 2009 Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement. How do i file taxes from 2009 To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903. How do i file taxes from 2009 Item 5 — moving personal effects (line 1)   $8,000 Item 6 — driving to San Diego ($528 + $180)  (line 2)   708 Total tax deductible moving expenses (line 3)   $8,708 Minus: Reimbursement included in box 12  of Form W-2 (line 4)   7,508 Tax deduction for moving expenses (line 5)   $1,200   Tom's Form 3903 is shown, later. How do i file taxes from 2009 He also enters his deduction, $1,200, on Form 1040, line 26. How do i file taxes from 2009 Nondeductible expenses. How do i file taxes from 2009   Of the $43,282 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,282 – $8,708) cannot be deducted. How do i file taxes from 2009 Item 1 — pre-move househunting expenses of $524. How do i file taxes from 2009 Item 2 — the $25,000 down payment on the San Diego home. How do i file taxes from 2009 If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction. How do i file taxes from 2009 Item 3 — the $3,500 real estate commission paid on the sale of the Detroit home. How do i file taxes from 2009 The commission is used to figure the gain or loss on the sale. How do i file taxes from 2009 Item 4 — the $1,500 loss on the sale of the Detroit home. How do i file taxes from 2009 Item 6 — the $320 expense for meals while driving to San Diego. How do i file taxes from 2009 (However, the lodging and car expenses are deductible. How do i file taxes from 2009 ) Item 7 — temporary living expenses of $3,730. How do i file taxes from 2009    This image is too large to be displayed in the current screen. How do i file taxes from 2009 Please click the link to view the image. How do i file taxes from 2009 2012 Form 3903 Moving Expenses Members of the Armed Forces If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet the distance and time tests, discussed earlier. How do i file taxes from 2009 You can deduct your unreimbursed moving expenses. How do i file taxes from 2009 A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. How do i file taxes from 2009 The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations. How do i file taxes from 2009 Spouse and dependents. How do i file taxes from 2009   If a member of the Armed Forces dies, is imprisoned, or deserts, a permanent change of station for the spouse or dependent includes a move to: The place of enlistment, The member's, spouse's, or dependent's home of record, or A nearer point in the United States. How do i file taxes from 2009   If the military moves you, your spouse, and dependents, to or from separate locations, the moves are treated as a single move to your new main job location. How do i file taxes from 2009 Services or reimbursements provided by government. How do i file taxes from 2009   Do not include in income the value of moving and storage services provided by the government because of a permanent change of station. How do i file taxes from 2009 In general, if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving expenses, the government must include the excess in your wages on Form W-2. How do i file taxes from 2009 However, the excess portion of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1 of Form W-2. How do i file taxes from 2009   If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements or allowances in income. How do i file taxes from 2009 You can deduct the expenses that are more than your reimbursements. How do i file taxes from 2009 See Deductible Moving Expenses, earlier. How do i file taxes from 2009 How to complete Form 3903 for members of the Armed Forces. How do i file taxes from 2009    Take the following steps. How do i file taxes from 2009 Complete lines 1 through 3 of the form, using your actual expenses. How do i file taxes from 2009 Do not include any expenses for moving services provided by the government. How do i file taxes from 2009 Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income. How do i file taxes from 2009 Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines 1 and 2. How do i file taxes from 2009 Do not include the value of moving or storage services provided by the government. How do i file taxes from 2009 Also, do not include any part of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance. How do i file taxes from 2009 Complete line 5. How do i file taxes from 2009 If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. How do i file taxes from 2009 This is your moving expense deduction. How do i file taxes from 2009 If line 3 is equal to or less than line 4, you do not have a moving expense deduction. How do i file taxes from 2009 Subtract line 3 from line 4 and, if the result is more than zero, enter it on Form 1040, line 7. How do i file taxes from 2009 If the military moves you, your spouse and dependents, to or from different locations, treat these moves as a single move. How do i file taxes from 2009    Do not deduct any expenses for moving or storage services provided by the government. How do i file taxes from 2009 How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. How do i file taxes from 2009 Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. How do i file taxes from 2009 Free help with your tax return. How do i file taxes from 2009   Free help in preparing your return is available nationwide from IRS-certified volunteers. How do i file taxes from 2009 The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. How do i file taxes from 2009 The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. How do i file taxes from 2009 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. How do i file taxes from 2009 Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. How do i file taxes from 2009 To find the nearest VITA or TCE site, visit IRS. How do i file taxes from 2009 gov or call 1-800-906-9887. How do i file taxes from 2009   As part of the TCE program, AARP offers the Tax-Aide counseling program. How do i file taxes from 2009 To find the nearest AARP Tax-Aide site, visit AARP's website at www. How do i file taxes from 2009 aarp. How do i file taxes from 2009 org/money/taxaide or call 1-888-227-7669. How do i file taxes from 2009   For more information on these programs, go to IRS. How do i file taxes from 2009 gov and enter “VITA” in the search box. How do i file taxes from 2009 Internet. How do i file taxes from 2009 IRS. How do i file taxes from 2009 gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. How do i file taxes from 2009 Apply for an Employer Identification Number (EIN). How do i file taxes from 2009 Go to IRS. How do i file taxes from 2009 gov and enter Apply for an EIN in the search box. How do i file taxes from 2009 Request an Electronic Filing PIN by going to IRS. How do i file taxes from 2009 gov and entering Electronic Filing PIN in the search box. How do i file taxes from 2009 Check the status of your 2013 refund with Where's My Refund? Go to IRS. How do i file taxes from 2009 gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. How do i file taxes from 2009 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. How do i file taxes from 2009 Check the status of your amended return. How do i file taxes from 2009 Go to IRS. How do i file taxes from 2009 gov and enter Where's My Amended Return in the search box. How do i file taxes from 2009 Download forms, instructions, and publications, including some accessible versions. How do i file taxes from 2009 Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. How do i file taxes from 2009 gov or IRS2Go. How do i file taxes from 2009 Tax return and tax account transcripts are generally available for the current year and past three years. How do i file taxes from 2009 Figure your income tax withholding with the IRS Withholding Calculator on IRS. How do i file taxes from 2009 gov. How do i file taxes from 2009 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. How do i file taxes from 2009 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. How do i file taxes from 2009 gov. How do i file taxes from 2009 Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. How do i file taxes from 2009 gov or IRS2Go. How do i file taxes from 2009 Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. How do i file taxes from 2009 An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. How do i file taxes from 2009 Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. How do i file taxes from 2009 If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. How do i file taxes from 2009 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. How do i file taxes from 2009 Locate the nearest volunteer help site with the VITA Locator Tool on IRS. How do i file taxes from 2009 gov. How do i file taxes from 2009 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. How do i file taxes from 2009 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. How do i file taxes from 2009 Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. How do i file taxes from 2009 AARP offers the Tax-Aide counseling program as part of the TCE program. How do i file taxes from 2009 Visit AARP's website to find the nearest Tax-Aide location. How do i file taxes from 2009 Research your tax questions. How do i file taxes from 2009 Search publications and instructions by topic or keyword. How do i file taxes from 2009 Read the Internal Revenue Code, regulations, or other official guidance. How do i file taxes from 2009 Read Internal Revenue Bulletins. How do i file taxes from 2009 Sign up to receive local and national tax news by email. How do i file taxes from 2009 Phone. How do i file taxes from 2009 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. How do i file taxes from 2009 Download the free IRS2Go mobile app from the iTunes app store or from Google Play. How do i file taxes from 2009 Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. How do i file taxes from 2009 Call to locate the nearest volunteer help site, 1-800-906-9887. How do i file taxes from 2009 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. How do i file taxes from 2009 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. How do i file taxes from 2009 Most VITA and TCE sites offer free electronic filing. How do i file taxes from 2009 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. How do i file taxes from 2009 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. How do i file taxes from 2009 Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. How do i file taxes from 2009 The automated Where's My Refund? information is available 24 hours a day, 7 days a week. How do i file taxes from 2009 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. How do i file taxes from 2009 Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. How do i file taxes from 2009 Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. How do i file taxes from 2009 Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. How do i file taxes from 2009 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. How do i file taxes from 2009 Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). How do i file taxes from 2009 You should receive your order within 10 business days. How do i file taxes from 2009 Call to order transcripts of your tax returns or tax account, 1-800-908-9946. How do i file taxes from 2009 Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. How do i file taxes from 2009 Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. How do i file taxes from 2009 Call to ask tax questions, 1-800-829-1040. How do i file taxes from 2009 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. How do i file taxes from 2009 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. How do i file taxes from 2009 These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. How do i file taxes from 2009 gsa. How do i file taxes from 2009 gov/fedrelay. How do i file taxes from 2009 Walk-in. How do i file taxes from 2009 You can find a selection of forms, publications and services — in-person, face-to-face. How do i file taxes from 2009 Products. How do i file taxes from 2009 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. How do i file taxes from 2009 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. How do i file taxes from 2009 Services. How do i file taxes from 2009 You can walk in to your local TAC most business days for personal, face-to-face tax help. How do i file taxes from 2009 An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. How do i file taxes from 2009 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. How do i file taxes from 2009 No appointment is necessary—just walk in. How do i file taxes from 2009 Before visiting, check www. How do i file taxes from 2009 irs. How do i file taxes from 2009 gov/localcontacts for hours of operation and services provided. How do i file taxes from 2009 Mail. How do i file taxes from 2009 You can send your order for forms, instructions, and publications to the address below. How do i file taxes from 2009 You should receive a response within 10 business days after your request is received. How do i file taxes from 2009  Internal Revenue Service 1201 N. How do i file taxes from 2009 Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. How do i file taxes from 2009   The Taxpayer Advocate Service (TAS) is your voice at the IRS. How do i file taxes from 2009 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. How do i file taxes from 2009 What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. How do i file taxes from 2009 We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. How do i file taxes from 2009 You face (or your business is facing) an immediate threat of adverse action. How do i file taxes from 2009 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. How do i file taxes from 2009   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. How do i file taxes from 2009 Here's why we can help: TAS is an independent organization within the IRS. How do i file taxes from 2009 Our advocates know how to work with the IRS. How do i file taxes from 2009 Our services are free and tailored to meet your needs. How do i file taxes from 2009 We have offices in every state, the District of Columbia, and Puerto Rico. How do i file taxes from 2009 How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. How do i file taxes from 2009 irs. How do i file taxes from 2009 gov/advocate, or call us toll-free at 1-877-777-4778. How do i file taxes from 2009 How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. How do i file taxes from 2009 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. How do i file taxes from 2009 irs. How do i file taxes from 2009 gov/sams. How do i file taxes from 2009 Low Income Taxpayer Clinics. How do i file taxes from 2009   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. How do i file taxes from 2009 Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. How do i file taxes from 2009 Visit www. 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How do i file taxes from 2009 Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. How do i file taxes from 2009 General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. How do i file taxes from 2009 Several assets. How do i file taxes from 2009 Special situations. How do i file taxes from 2009 Schedule D (Form 1040). How do i file taxes from 2009 Form 4797. How do i file taxes from 2009 How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. How do i file taxes from 2009 The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. How do i file taxes from 2009 The installment sales method cannot be used for the following. How do i file taxes from 2009 Sale of inventory. How do i file taxes from 2009   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. How do i file taxes from 2009 See Sale of a Business under Other Rules, later. How do i file taxes from 2009 Dealer sales. How do i file taxes from 2009   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. How do i file taxes from 2009 This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. How do i file taxes from 2009 However, the rule does not apply to an installment sale of property used or produced in farming. How do i file taxes from 2009 Special rule. How do i file taxes from 2009   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. How do i file taxes from 2009 For more information, see section 453(l). How do i file taxes from 2009 Stock or securities. How do i file taxes from 2009   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. How do i file taxes from 2009 You must report the entire gain on the sale in the year in which the trade date falls. How do i file taxes from 2009 Installment obligation. How do i file taxes from 2009   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. How do i file taxes from 2009 General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. How do i file taxes from 2009 See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. How do i file taxes from 2009 Sale at a loss. How do i file taxes from 2009   If your sale results in a loss, you cannot use the installment method. How do i file taxes from 2009 If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. How do i file taxes from 2009 Unstated interest. How do i file taxes from 2009   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. How do i file taxes from 2009 See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. How do i file taxes from 2009 Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. How do i file taxes from 2009 Each payment on an installment sale usually consists of the following three parts. How do i file taxes from 2009 Interest income. How do i file taxes from 2009 Return of your adjusted basis in the property. How do i file taxes from 2009 Gain on the sale. How do i file taxes from 2009 In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. How do i file taxes from 2009 You do not include in income the part that is the return of your basis in the property. How do i file taxes from 2009 Basis is the amount of your investment in the property for installment sale purposes. How do i file taxes from 2009 Interest Income You must report interest as ordinary income. How do i file taxes from 2009 Interest is generally not included in a down payment. How do i file taxes from 2009 However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. How do i file taxes from 2009 Interest provided in the agreement is called stated interest. How do i file taxes from 2009 If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. How do i file taxes from 2009 See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. How do i file taxes from 2009 Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. How do i file taxes from 2009 A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). How do i file taxes from 2009 Figuring adjusted basis for installment sale purposes. How do i file taxes from 2009   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. How do i file taxes from 2009 When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. How do i file taxes from 2009 Worksheet A. How do i file taxes from 2009 Figuring Adjusted Basis and Gross Profit Percentage 1. How do i file taxes from 2009 Enter the selling price for the property   2. How do i file taxes from 2009 Enter your adjusted basis for the property     3. How do i file taxes from 2009 Enter your selling expenses     4. How do i file taxes from 2009 Enter any depreciation recapture     5. How do i file taxes from 2009 Add lines 2, 3, and 4. How do i file taxes from 2009  This is your adjusted basis for installment sale purposes   6. How do i file taxes from 2009 Subtract line 5 from line 1. How do i file taxes from 2009 If zero or less, enter -0-. How do i file taxes from 2009  This is your gross profit     If the amount entered on line 6 is zero, stop here. How do i file taxes from 2009 You cannot use the installment method. How do i file taxes from 2009   7. How do i file taxes from 2009 Enter the contract price for the property   8. How do i file taxes from 2009 Divide line 6 by line 7. How do i file taxes from 2009 This is your gross profit percentage   Selling price. How do i file taxes from 2009   The selling price is the total cost of the property to the buyer and includes any of the following. How do i file taxes from 2009 Any money you are to receive. How do i file taxes from 2009 The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). How do i file taxes from 2009 Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). How do i file taxes from 2009 Any of your selling expenses the buyer pays. How do i file taxes from 2009   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. How do i file taxes from 2009 Adjusted basis for installment sale purposes. How do i file taxes from 2009   Your adjusted basis is the total of the following three items. How do i file taxes from 2009 Adjusted basis. How do i file taxes from 2009 Selling expenses. How do i file taxes from 2009 Depreciation recapture. How do i file taxes from 2009 Adjusted basis. How do i file taxes from 2009   Basis is your investment in the property for installment sale purposes. How do i file taxes from 2009 The way you figure basis depends on how you acquire the property. How do i file taxes from 2009 The basis of property you buy is generally its cost. How do i file taxes from 2009 The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. How do i file taxes from 2009   While you own property, various events may change your original basis. How do i file taxes from 2009 Some events, such as adding rooms or making permanent improvements, increase basis. How do i file taxes from 2009 Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. How do i file taxes from 2009 The result is adjusted basis. How do i file taxes from 2009   For more information on how to figure basis and adjusted basis, see Publication 551. How do i file taxes from 2009 For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. How do i file taxes from 2009 Selling expenses. How do i file taxes from 2009   Selling expenses relate to the sale of the property. How do i file taxes from 2009 They include commissions, attorney fees, and any other expenses paid on the sale. How do i file taxes from 2009 Selling expenses are added to the basis of the sold property. How do i file taxes from 2009 Depreciation recapture. How do i file taxes from 2009   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. How do i file taxes from 2009 See Depreciation Recapture Income under Other Rules, later. How do i file taxes from 2009 Gross profit. How do i file taxes from 2009   Gross profit is the total gain you report on the installment method. How do i file taxes from 2009   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. How do i file taxes from 2009 If the property you sold was your home, subtract from the gross profit any gain you can exclude. How do i file taxes from 2009 See Sale of Your Home , later, under Reporting Installment Sale Income. How do i file taxes from 2009 Contract price. How do i file taxes from 2009   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. How do i file taxes from 2009 Gross profit percentage. How do i file taxes from 2009   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. How do i file taxes from 2009 This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. How do i file taxes from 2009   The gross profit percentage generally remains the same for each payment you receive. How do i file taxes from 2009 However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. How do i file taxes from 2009 Example. How do i file taxes from 2009 You sell property at a contract price of $6,000 and your gross profit is $1,500. How do i file taxes from 2009 Your gross profit percentage is 25% ($1,500 ÷ $6,000). How do i file taxes from 2009 After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. How do i file taxes from 2009 The remainder (balance) of each payment is the tax-free return of your adjusted basis. How do i file taxes from 2009 Amount to report as installment sale income. How do i file taxes from 2009   Multiply the payments you receive each year (less interest) by the gross profit percentage. How do i file taxes from 2009 The result is your installment sale income for the tax year. How do i file taxes from 2009 In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. How do i file taxes from 2009 A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. How do i file taxes from 2009 For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. How do i file taxes from 2009 Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. How do i file taxes from 2009 You then must refigure the gross profit percentage for the remaining payments. How do i file taxes from 2009 Refigure your gross profit using Worksheet B. How do i file taxes from 2009 You will spread any remaining gain over future installments. How do i file taxes from 2009 Worksheet B. How do i file taxes from 2009 New Gross Profit Percentage — Selling Price Reduced 1. How do i file taxes from 2009 Enter the reduced selling  price for the property   2. How do i file taxes from 2009 Enter your adjusted  basis for the  property     3. How do i file taxes from 2009 Enter your selling  expenses     4. How do i file taxes from 2009 Enter any depreciation  recapture     5. How do i file taxes from 2009 Add lines 2, 3, and 4. How do i file taxes from 2009   6. How do i file taxes from 2009 Subtract line 5 from line 1. How do i file taxes from 2009  This is your adjusted  gross profit   7. How do i file taxes from 2009 Enter any installment sale  income reported in  prior year(s)   8. How do i file taxes from 2009 Subtract line 7 from line 6   9. How do i file taxes from 2009 Future installments   10. How do i file taxes from 2009 Divide line 8 by line 9. How do i file taxes from 2009  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. How do i file taxes from 2009 Example. How do i file taxes from 2009 In 2011, you sold land with a basis of $40,000 for $100,000. How do i file taxes from 2009 Your gross profit was $60,000. How do i file taxes from 2009 You received a $20,000 down payment and the buyer's note for $80,000. How do i file taxes from 2009 The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. How do i file taxes from 2009 Your gross profit percentage is 60%. How do i file taxes from 2009 You reported a gain of $12,000 on each payment received in 2011 and 2012. How do i file taxes from 2009 In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. How do i file taxes from 2009 The new gross profit percentage, 46. How do i file taxes from 2009 67%, is figured on Example—Worksheet B. How do i file taxes from 2009 You will report a gain of $7,000 (46. How do i file taxes from 2009 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. How do i file taxes from 2009 Example — Worksheet B. How do i file taxes from 2009 New Gross Profit Percentage — Selling Price Reduced 1. How do i file taxes from 2009 Enter the reduced selling  price for the property 85,000 2. How do i file taxes from 2009 Enter your adjusted  basis for the  property 40,000   3. How do i file taxes from 2009 Enter your selling  expenses -0-   4. How do i file taxes from 2009 Enter any depreciation  recapture -0-   5. How do i file taxes from 2009 Add lines 2, 3, and 4. How do i file taxes from 2009 40,000 6. How do i file taxes from 2009 Subtract line 5 from line 1. How do i file taxes from 2009  This is your adjusted  gross profit 45,000 7. How do i file taxes from 2009 Enter any installment sale  income reported in  prior year(s) 24,000 8. How do i file taxes from 2009 Subtract line 7 from line 6 21,000 9. How do i file taxes from 2009 Future installments 45,000 10. How do i file taxes from 2009 Divide line 8 by line 9. How do i file taxes from 2009  This is your new gross profit percentage* 46. How do i file taxes from 2009 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. How do i file taxes from 2009 Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. How do i file taxes from 2009 You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. How do i file taxes from 2009 See Schedule D (Form 1040) and Form 4797 , later. How do i file taxes from 2009 If the property was your main home, you may be able to exclude part or all of the gain. How do i file taxes from 2009 See Sale of Your Home , later. How do i file taxes from 2009 Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. How do i file taxes from 2009 Attach it to your tax return for each year. How do i file taxes from 2009 Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. How do i file taxes from 2009 Which parts to complete. How do i file taxes from 2009   Which part to complete depends on whether you are filing the form for the year of sale or a later year. How do i file taxes from 2009 Year of sale. How do i file taxes from 2009   Complete lines 1 through 4, Part I, and Part II. How do i file taxes from 2009 If you sold property to a related party during the year, also complete Part III. How do i file taxes from 2009 Later years. How do i file taxes from 2009   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. How do i file taxes from 2009   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. How do i file taxes from 2009 (After December 31, 1986, the installment method is not available for the sale of marketable securities. How do i file taxes from 2009 ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. How do i file taxes from 2009 Complete Part III unless you received the final payment during the tax year. How do i file taxes from 2009   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. How do i file taxes from 2009 Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. How do i file taxes from 2009 Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. How do i file taxes from 2009 Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). How do i file taxes from 2009 If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. How do i file taxes from 2009 Your gain is long-term if you owned the property for more than 1 year when you sold it. How do i file taxes from 2009 Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. How do i file taxes from 2009 All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. How do i file taxes from 2009 For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. How do i file taxes from 2009 If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. How do i file taxes from 2009 ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. How do i file taxes from 2009 See Publication 523 for information about excluding the gain. How do i file taxes from 2009 If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. How do i file taxes from 2009 Seller-financed mortgage. How do i file taxes from 2009   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. How do i file taxes from 2009   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. How do i file taxes from 2009   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. How do i file taxes from 2009   If either person fails to include the other person's SSN, a $50 penalty will be assessed. How do i file taxes from 2009 Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. How do i file taxes from 2009 The following topics are discussed. How do i file taxes from 2009 Electing out of the installment method. How do i file taxes from 2009 Payments received or considered received. How do i file taxes from 2009 Escrow account. How do i file taxes from 2009 Depreciation recapture income. How do i file taxes from 2009 Sale to a related person. How do i file taxes from 2009 Like-kind exchange. How do i file taxes from 2009 Contingent payment sale. How do i file taxes from 2009 Single sale of several assets. How do i file taxes from 2009 Sale of a business. How do i file taxes from 2009 Unstated interest and original issue discount. How do i file taxes from 2009 Disposition of an installment obligation. How do i file taxes from 2009 Repossession. How do i file taxes from 2009 Interest on deferred tax. How do i file taxes from 2009 Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. How do i file taxes from 2009 To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. How do i file taxes from 2009 Notes, mortgages, and land contracts are examples of obligations that are included at FMV. How do i file taxes from 2009 You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. How do i file taxes from 2009 If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). How do i file taxes from 2009 Example. How do i file taxes from 2009 You sold a parcel of land for $50,000. How do i file taxes from 2009 You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. How do i file taxes from 2009 The buyer gave you a note for $40,000. How do i file taxes from 2009 The note had an FMV of $40,000. How do i file taxes from 2009 You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. How do i file taxes from 2009 The land cost $25,000, and you owned it for more than one year. How do i file taxes from 2009 You decide to elect out of the installment method and report the entire gain in the year of sale. How do i file taxes from 2009 Gain realized:     Selling price $50,000 Minus: Property's adj. How do i file taxes from 2009 basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. How do i file taxes from 2009 basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. How do i file taxes from 2009 You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. How do i file taxes from 2009 The interest on the note is ordinary income and is reported as interest income each year. How do i file taxes from 2009 How to elect out. How do i file taxes from 2009   To make this election, do not report your sale on Form 6252. How do i file taxes from 2009 Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. How do i file taxes from 2009 When to elect out. How do i file taxes from 2009   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. How do i file taxes from 2009 Automatic six-month extension. How do i file taxes from 2009   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). How do i file taxes from 2009 Write “Filed pursuant to section 301. How do i file taxes from 2009 9100-2” at the top of the amended return and file it where the original return was filed. How do i file taxes from 2009 Revoking the election. How do i file taxes from 2009   Once made, the election can be revoked only with IRS approval. How do i file taxes from 2009 A revocation is retroactive. How do i file taxes from 2009 You will not be allowed to revoke the election if either of the following applies. How do i file taxes from 2009 One of the purposes is to avoid federal income tax. How do i file taxes from 2009 The tax year in which any payment was received has closed. How do i file taxes from 2009 Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. How do i file taxes from 2009 In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. How do i file taxes from 2009 These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. How do i file taxes from 2009 However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. How do i file taxes from 2009 Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. How do i file taxes from 2009 Include these expenses in the selling and contract prices when figuring the gross profit percentage. How do i file taxes from 2009 Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. How do i file taxes from 2009 Mortgage not more than basis. How do i file taxes from 2009   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. How do i file taxes from 2009 It is considered a recovery of your basis. How do i file taxes from 2009 The contract price is the selling price minus the mortgage. How do i file taxes from 2009 Example. How do i file taxes from 2009 You sell property with an adjusted basis of $19,000. How do i file taxes from 2009 You have selling expenses of $1,000. How do i file taxes from 2009 The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). How do i file taxes from 2009 The selling price is $25,000 ($15,000 + $10,000). How do i file taxes from 2009 Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). How do i file taxes from 2009 The contract price is $10,000 ($25,000 − $15,000 mortgage). How do i file taxes from 2009 Your gross profit percentage is 50% ($5,000 ÷ $10,000). How do i file taxes from 2009 You report half of each $2,000 payment received as gain from the sale. How do i file taxes from 2009 You also report all interest you receive as ordinary income. How do i file taxes from 2009 Mortgage more than basis. How do i file taxes from 2009   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. How do i file taxes from 2009 The part of the mortgage greater than your basis is treated as a payment received in the year of sale. How do i file taxes from 2009   To figure the contract price, subtract the mortgage from the selling price. How do i file taxes from 2009 This is the total amount (other than interest) you will receive directly from the buyer. How do i file taxes from 2009 Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). How do i file taxes from 2009 The contract price is then the same as your gross profit from the sale. How do i file taxes from 2009    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. How do i file taxes from 2009 Example. How do i file taxes from 2009 The selling price for your property is $9,000. How do i file taxes from 2009 The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. How do i file taxes from 2009 Your adjusted basis in the property is $4,400. How do i file taxes from 2009 You have selling expenses of $600, for a total installment sale basis of $5,000. How do i file taxes from 2009 The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). How do i file taxes from 2009 This amount is included in the contract price and treated as a payment received in the year of sale. How do i file taxes from 2009 The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. How do i file taxes from 2009 Report 100% of each payment (less interest) as gain from the sale. How do i file taxes from 2009 Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. How do i file taxes from 2009 Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. How do i file taxes from 2009 You are considered to receive a payment equal to the outstanding canceled debt. How do i file taxes from 2009 Example. How do i file taxes from 2009 Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. How do i file taxes from 2009 On April 4, 2013, she bought the land for $70,000. How do i file taxes from 2009 At that time, $30,000 of her loan to you was outstanding. How do i file taxes from 2009 She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. How do i file taxes from 2009 She did not assume an existing mortgage. How do i file taxes from 2009 She canceled the $30,000 debt you owed her. How do i file taxes from 2009 You are considered to have received a $30,000 payment at the time of the sale. How do i file taxes from 2009 Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. How do i file taxes from 2009 If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. How do i file taxes from 2009 Compare the debt to your installment sale basis in the property being sold. How do i file taxes from 2009 If the debt is less than your installment sale basis, none of it is treated as a payment. How do i file taxes from 2009 If it is more, only the difference is treated as a payment. How do i file taxes from 2009 If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. How do i file taxes from 2009 These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . How do i file taxes from 2009 However, they apply only to the following types of debt the buyer assumes. How do i file taxes from 2009 Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. How do i file taxes from 2009 Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. How do i file taxes from 2009 If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. How do i file taxes from 2009 The value of the assumed debt is then considered a payment to you in the year of sale. How do i file taxes from 2009 Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. How do i file taxes from 2009 However, see Like-Kind Exchange , later. How do i file taxes from 2009 Generally, the amount of the payment is the property's FMV on the date you receive it. How do i file taxes from 2009 Exception. How do i file taxes from 2009   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. How do i file taxes from 2009 See Unstated Interest and Original Issue Discount (OID) , later. How do i file taxes from 2009 Debt not payable on demand. How do i file taxes from 2009   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. How do i file taxes from 2009 This is true even if the debt is guaranteed by a third party, including a government agency. How do i file taxes from 2009 Fair market value (FMV). How do i file taxes from 2009   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. How do i file taxes from 2009 Third-party note. How do i file taxes from 2009   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. How do i file taxes from 2009 Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. How do i file taxes from 2009 The excess of the note's face value over its FMV is interest. How do i file taxes from 2009 Exclude this interest in determining the selling price of the property. How do i file taxes from 2009 However, see Exception under Property Used As a Payment, earlier. How do i file taxes from 2009 Example. How do i file taxes from 2009 You sold real estate in an installment sale. How do i file taxes from 2009 As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. How do i file taxes from 2009 The FMV of the third-party note at the time of the sale was $30,000. How do i file taxes from 2009 This amount, not $50,000, is a payment to you in the year of sale. How do i file taxes from 2009 The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. How do i file taxes from 2009 The remaining 40% is interest taxed as ordinary income. How do i file taxes from 2009 Bond. How do i file taxes from 2009   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. How do i file taxes from 2009 For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. How do i file taxes from 2009    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. How do i file taxes from 2009 However, see Exception under Property Used As a Payment, earlier. How do i file taxes from 2009 Buyer's note. How do i file taxes from 2009   The buyer's note (unless payable on demand) is not considered payment on the sale. How do i file taxes from 2009 However, its full face value is included when figuring the selling price and the contract price. How do i file taxes from 2009 Payments you receive on the note are used to figure your gain in the year received. How do i file taxes from 2009 Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. How do i file taxes from 2009 This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. How do i file taxes from 2009 It does not apply to the following dispositions. How do i file taxes from 2009 Sales of property used or produced in farming. How do i file taxes from 2009 Sales of personal-use property. How do i file taxes from 2009 Qualifying sales of time-shares and residential lots. How do i file taxes from 2009 The net debt proceeds are the gross debt minus the direct expenses of getting the debt. How do i file taxes from 2009 The amount treated as a payment is considered received on the later of the following dates. How do i file taxes from 2009 The date the debt becomes secured. How do i file taxes from 2009 The date you receive the debt proceeds. How do i file taxes from 2009 A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. How do i file taxes from 2009 For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. How do i file taxes from 2009 Limit. How do i file taxes from 2009   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. How do i file taxes from 2009 The total contract price on the installment sale. How do i file taxes from 2009 Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. How do i file taxes from 2009 Installment payments. How do i file taxes from 2009   The pledge rule accelerates the reporting of the installment obligation payments. How do i file taxes from 2009 Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. How do i file taxes from 2009 Exception. How do i file taxes from 2009   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. How do i file taxes from 2009 The debt was outstanding on December 17, 1987. How do i file taxes from 2009 The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. How do i file taxes from 2009   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. How do i file taxes from 2009   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. How do i file taxes from 2009 Any excess is treated as a payment on the installment obligation. How do i file taxes from 2009 Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. How do i file taxes from 2009 These sales cannot be reported on the installment method. How do i file taxes from 2009 The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. How do i file taxes from 2009 When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. How do i file taxes from 2009 Example. How do i file taxes from 2009 You sell property for $100,000. How do i file taxes from 2009 The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. How do i file taxes from 2009 You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. How do i file taxes from 2009 You report the entire gain in the year of sale. How do i file taxes from 2009 Escrow established in a later year. How do i file taxes from 2009   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. How do i file taxes from 2009 Substantial restriction. How do i file taxes from 2009   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. How do i file taxes from 2009 For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. How do i file taxes from 2009 Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. How do i file taxes from 2009 Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. How do i file taxes from 2009 Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. How do i file taxes from 2009 The recapture income is also included in Part I of Form 6252. How do i file taxes from 2009 However, the gain equal to the recapture income is reported in full in the year of the sale. How do i file taxes from 2009 Only the gain greater than the recapture income is reported on the installment method. How do i file taxes from 2009 For more information on depreciation recapture, see chapter 3 in Publication 544. How do i file taxes from 2009 The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. How do i file taxes from 2009 Determining gross profit is discussed under General Rules , earlier. How do i file taxes from 2009 Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. How do i file taxes from 2009 If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. How do i file taxes from 2009 These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. How do i file taxes from 2009 Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. How do i file taxes from 2009 Instead, all payments to be received are considered received in the year of sale. How do i file taxes from 2009 However, see Exception , below. How do i file taxes from 2009 Depreciable property for this rule is any property the purchaser can depreciate. How do i file taxes from 2009 Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. How do i file taxes from 2009 In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. How do i file taxes from 2009 The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. How do i file taxes from 2009 Exception. How do i file taxes from 2009   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. How do i file taxes from 2009 You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. How do i file taxes from 2009 Related person. How do i file taxes from 2009   Related persons include the following. How do i file taxes from 2009 A person and all controlled entities with respect to that person. How do i file taxes from 2009 A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. How do i file taxes from 2009 Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. How do i file taxes from 2009 Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. How do i file taxes from 2009   For information about which entities are controlled entities, see section 1239(c). How do i file taxes from 2009 Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. How do i file taxes from 2009 The related person makes the second disposition before making all payments on the first disposition. How do i file taxes from 2009 The related person disposes of the property within 2 years of the first disposition. How do i file taxes from 2009 This rule does not apply if the property involved is marketable securities. How do i file taxes from 2009 Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. How do i file taxes from 2009 See Exception , later. How do i file taxes from 2009 Related person. How do i file taxes from 2009   Related persons include the following. How do i file taxes from 2009 Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. How do i file taxes from 2009 A partnership or estate and a partner or beneficiary. How do i file taxes from 2009 A trust (other than a section 401(a) employees trust) and a beneficiary. How do i file taxes from 2009 A trust and an owner of the trust. How do i file taxes from 2009 Two corporations that are members of the same controlled group as defined in section 267(f). How do i file taxes from 2009 The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. How do i file taxes from 2009 A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. How do i file taxes from 2009 An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. How do i file taxes from 2009 A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. How do i file taxes from 2009 The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. How do i file taxes from 2009 Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file taxes from 2009 An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file taxes from 2009 A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. How do i file taxes from 2009 An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. How do i file taxes from 2009 Example 1. How do i file taxes from 2009 In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. How do i file taxes from 2009 His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. How do i file taxes from 2009 His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). How do i file taxes from 2009 He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. How do i file taxes from 2009 50). How do i file taxes from 2009 Bob made no improvements to the property and sold it to Alfalfa Inc. How do i file taxes from 2009 , in 2013 for $600,000 after making the payment for that year. How do i file taxes from 2009 The amount realized from the second disposition is $600,000. How do i file taxes from 2009 Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . How do i file taxes from 2009 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). How do i file taxes from 2009 Example 2. How do i file taxes from 2009 Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. How do i file taxes from 2009 The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . How do i file taxes from 2009 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. How do i file taxes from 2009 They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. How do i file taxes from 2009 In 2016, he receives the final $100,000 payment. How do i file taxes from 2009 He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . How do i file taxes from 2009 50 Installment sale income for 2016 $ 50,000 Exception. How do i file taxes from 2009   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. How do i file taxes from 2009 Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. How do i file taxes from 2009   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. How do i file taxes from 2009 However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. How do i file taxes from 2009   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. How do i file taxes from 2009 An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. How do i file taxes from 2009 A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. How do i file taxes from 2009 Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. How do i file taxes from 2009 These trades are known as like-kind exchanges. How do i file taxes from 2009 The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. How do i file taxes from 2009 You do not have to report any part of your gain if you receive only like-kind property. How do i file taxes from 2009 However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. How do i file taxes from 2009 For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. How do i file taxes from 2009 Installment payments. How do i file taxes from 2009   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. How do i file taxes from 2009 The contract price is reduced by the FMV of the like-kind property received in the trade. How do i file taxes from 2009 The gross profit is reduced by any gain on the trade that can be postponed. How do i file taxes from 2009 Like-kind property received in the trade is not considered payment on the installment obligation. How do i file taxes from 2009 Example. How do i file taxes from 2009 In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. How do i file taxes from 2009 He also receives an installment note for $800,000 in the trade. How do i file taxes from 2009 Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. How do i file taxes from 2009 George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). How do i file taxes from 2009 His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). How do i file taxes from 2009 The contract price is $800,000 ($1,000,000 − $200,000). How do i file taxes from 2009 The gross profit percentage is 75% ($600,000 ÷ $800,000). How do i file taxes from 2009 He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. How do i file taxes from 2009 He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). How do i file taxes from 2009 Deferred exchanges. How do i file taxes from 2009   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. How do i file taxes from 2009 Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. How do i file taxes from 2009 If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. How do i file taxes from 2009 See Regulations section 1. How do i file taxes from 2009 1031(k)-1(j)(2) for these rules. How do i file taxes from 2009 Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. How do i file taxes from 2009 This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. How do i file taxes from 2009 If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. How do i file taxes from 2009 For rules on using the installment method for a contingent payment sale, see Regulations section 15a. How do i file taxes from 2009 453-1(c). How do i file taxes from 2009 Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. How do i file taxes from 2009 You also have to allocate part of the selling price to each asset. How do i file taxes from 2009 If you sell assets that constitute a trade or business, see Sale of a Business , later. How do i file taxes from 2009 Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. How do i file taxes from 2009 If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. How do i file taxes from 2009 This becomes the net FMV. How do i file taxes from 2009 A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. How do i file taxes from 2009 However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. How do i file taxes from 2009 It must be reported separately. How do i file taxes from 2009 The remaining assets sold at a gain are reported together. How do i file taxes from 2009 Example. How do i file taxes from 2009 You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. How do i file taxes from 2009 The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. How do i file taxes from 2009 Your installment sale basis for each parcel was $15,000. How do i file taxes from 2009 Your net gain was $85,000 ($130,000 − $45,000). How do i file taxes from 2009 You report the gain on the installment method. How do i file taxes from 2009 The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. How do i file taxes from 2009 The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. How do i file taxes from 2009 The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. How do i file taxes from 2009 You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. How do i file taxes from 2009 Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. How do i file taxes from 2009 You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. How do i file taxes from 2009 The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. How do i file taxes from 2009 You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. How do i file taxes from 2009 However, if parcel C was held for personal use, the loss is not deductible. How do i file taxes from 2009 You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). How do i file taxes from 2009 Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. How do i file taxes from 2009 Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. How do i file taxes from 2009 Assets sold at a loss. How do i file taxes from 2009 Real and personal property eligible for the installment method. How do i file taxes from 2009 Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. How do i file taxes from 2009 Inventory. How do i file taxes from 2009   The sale of inventories of personal property cannot be reported on the installment method. How do i file taxes from 2009 All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. How do i file taxes from 2009   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. How do i file taxes from 2009 If you do not, each payment must be allocated between the inventory and the other assets sold. How do i file taxes from 2009   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. How do i file taxes from 2009 Use your basis in the inventory to figure the cost of goods sold. How do i file taxes from 2009 Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. How do i file taxes from 2009 Residual method. How do i file taxes from 2009   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. How do i file taxes from 2009 This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. How do i file taxes from 2009   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. How do i file taxes from 2009 This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b). How do i file taxes from 2009   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. How do i file taxes from 2009   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). How do i file taxes from 2009 The consideration remaining after this reduction must be allocated among the various business assets in a certain order. How do i file taxes from 2009   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. How do i file taxes from 2009 Certificates of deposit, U. How do i file taxes from 2009 S. How do i file taxes from 2009 Government securities, foreign currency, and actively traded personal property, including stock and securities. How do i file taxes from 2009 Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. How do i file taxes from 2009 However, see Regulations section 1. How do i file taxes from 2009 338-6(b)(2)(iii) for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. How do i file taxes from 2009 Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. How do i file taxes from 2009 All other assets except section 197 intangibles. How do i file taxes from 2009 Section 197 intangibles except goodwill and going concern value. How do i file taxes from 2009 Goodwill and going concern value (whether or not they qualify as section 197 intangibles). How do i file taxes from 2009   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. How do i file taxes from 2009 For example, if an asset is described in both (4) and (6), include it in (4). How do i file taxes from 2009 Agreement. How do i file taxes from 2009   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. How do i file taxes from 2009 This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. How do i file taxes from 2009 Reporting requirement. How do i file taxes from 2009   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. How do i file taxes from 2009 Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. How do i file taxes from 2009 The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. How do i file taxes from 2009 Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. How do i file taxes from 2009 The sale of a partnership interest is treated as the sale of a single capital asset. How do i file taxes from 2009 The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. How do i file taxes from 2009 (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. How do i file taxes from 2009 ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. How do i file taxes from 2009 The gain allocated to the other assets can be reported under the installment method. How do i file taxes from 2009 For more information on the treatment of unrealized receivables and inventory, see Publication 541. How do i file taxes from 2009 Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. How do i file taxes from 2009 You received a $100,000 down payment and the buyer's note for $120,000. How do i file taxes from 2009 The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. How do i file taxes from 2009 The total selling price is $220,000. How do i file taxes from 2009 Your selling expenses are $11,000. How do i file taxes from 2009 The selling expenses are divided among all the assets sold, including inventory. How do i file taxes from 2009 Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). How do i file taxes from 2009 The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. How do i file taxes from 2009 Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). How do i file taxes from 2009 The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. How do i file taxes from 2009 The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. How do i file taxes from 2009   Sale  Price Sale   Exp. How do i file taxes from 2009 Adj. How do i file taxes from 2009   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. How do i file taxes from 2009 A 71,000 3,550 63,800 3,650 Mch. How do i file taxes from 2009 B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. How do i file taxes from 2009 There is no depreciation recapture income because the building was depreciated using the straight line method. How do i file taxes from 2009 All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. How do i file taxes from 2009 Figure depreciation recapture in Part III of Form 4797. How do i file taxes from 2009 The total depreciation recapture income reported in Part II of Form 4797 is $5,209. How do i file taxes from 2009 This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). How do i file taxes from 2009 These gains are reported in full in the year of sale and are not included in the installment sale computation. How do i file taxes from 2009 Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. How do i file taxes from 2009 The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. How do i file taxes from 2009 The selling price equals the contract price for the installment sale ($108,500). How do i file taxes from 2009 The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. How do i file taxes from 2009   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). How do i file taxes from 2009 The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. How do i file taxes from 2009 95 Building— $9,600 ÷ $108,500 8. How do i file taxes from 2009 85 Goodwill— $17,575 ÷ $108,500 16. How do i file taxes from 2009 20 Total 48. How do i file taxes from 2009 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. How do i file taxes from 2009 The selling price for the installment sale is $108,500. How do i file taxes from 2009 This is 49. How do i file taxes from 2009 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). How do i file taxes from 2009 The selling price of assets not reported on the installment method is $111,500. How do i file taxes from 2009 This is 50. How do i file taxes from 2009 7% ($111,500 ÷ $220,000) of the total selling price. How do i file taxes from 2009 Multiply principal payments by 49. How do i file taxes from 2009 3% to determine the part of the payment for the installment sale. How do i file taxes from 2009 The balance, 50. How do i file taxes from 2009 7%, is for the part reported in the year of the sale. How do i file taxes from 2009 The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. How do i file taxes from 2009 When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. How do i file taxes from 2009 Only the part for the installment sale (49. How do i file taxes from 2009 3%) is used in the installment sale computation. How do i file taxes from 2009 The only payment received in 2013 is the down payment of $100,000. How do i file taxes from 2009 The part of the payment for the installment sale is $49,300 ($100,000 × 49. How do i file taxes from 2009 3%). How do i file taxes from 2009 This amount is used in the installment sale computation. How do i file taxes from 2009 Installment income for 2013. How do i file taxes from 2009   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. How do i file taxes from 2009 Income Land—22. How do i file taxes from 2009 95% of $49,300 $11,314 Building—8. How do i file taxes from 2009 85% of $49,300 4,363 Goodwill—16. How do i file taxes from 2009 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. How do i file taxes from 2009   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. How do i file taxes from 2009 3% of the total payments you receive on the buyer's note during the year. How do i file taxes from 2009 Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. How do i file taxes from 2009 Interest provided in the contract is called stated interest. How do i file taxes from 2009 If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. How do i file taxes from 2009 If section 483 applies to the contract, this interest is called unstated interest. How do i file taxes from 2009 If section 1274 applies to the contract, this interest is called original issue discount (OID). How do i file taxes from 2009 An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). How do i file taxes from 2009 Treatment of unstated interest and OID. How do i file taxes from 2009   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. How do i file taxes from 2009 As a result, the buyer cannot deduct the unstated interest. How do i file taxes from 2009 The seller must report the unstated interest as income. How do i file taxes from 2009   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. How do i file taxes from 2009   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. How do i file taxes from 2009 Rules for the seller. How do i file taxes from 2009   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. How do i file taxes from 2009 If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. How do i file taxes from 2009   Include the unstated interest in income based on your regular method of accounting. How do i file taxes from 2009 Include OID in income over the term of the contract. How do i file taxes from 2009   The OID includible in income each year is based on the constant yield method described in section 1272. How do i file taxes from 2009 (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. How do i file taxes from 2009 )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. How do i file taxes from 2009 Reduce the selling price by any stated principal treated as interest to determine the gain. How do i file taxes from 2009   Report unstated interest or OID on your tax return, in addition to stated interest. How do i file taxes from 2009 Rules for the buyer. How do i file taxes from 2009   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. How do i file taxes from 2009 These rules do not apply to personal-use property (for example, property not used in a trade or business). How do i file taxes from 2009 Adequate stated interest. How do i file taxes from 2009   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. How do i file taxes from 2009 The present value of a payment is determined based on the test rate of interest, defined next. How do i file taxes from 2009 (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. How do i file taxes from 2009 ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. How do i file taxes from 2009 Test rate of interest. How do i file taxes from 2009   The test rate of interest for a contract is the 3-month rate. How do i file taxes from 2009 The 3-month rate is the lower of the following applicable federal rates (AFRs). How do i file taxes from 2009 The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed. How do i file taxes from 2009 The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs. How do i file taxes from 2009 Applicable federal rate (AFR). How do i file taxes from 2009   The AFR depends on the month the binding