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How Far Back Can I Amend My Taxes

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How Far Back Can I Amend My Taxes

How far back can i amend my taxes 5. How far back can i amend my taxes   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Prohibited Tax Shelter TransactionsEntity Level Tax Excess Benefit TransactionsTax on Disqualified Persons Tax on Organization Managers Excess Benefit Transaction Excess Business Holdings Taxable Distributions of Sponsoring Organizations Exception. How far back can i amend my taxes A donor advised fund does not include: Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Excise Taxes on Private Foundations Excise Taxes on Black Lung Benefit Trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements Introduction An excise tax may be imposed on certain tax-exempt organizations. How far back can i amend my taxes Topics - This chapter discusses: Prohibited tax shelter transactions Excess benefit transactions Excess business holdings Taxable distributions of sponsoring organizations Taxes on prohibited benefits distributed from donor advised funds Excise taxes on private foundations Excise taxes on 501(c)(21) black lung benefit trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements of Hospitals Useful Items - You may want to see: Forms (and Instructions) 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code See chapter 6 for more information about getting Form 4720. How far back can i amend my taxes Prohibited Tax Shelter Transactions Section 4965 imposes an excise tax on: Certain tax-exempt entities that are party to prohibited tax shelter transactions, and Any entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. How far back can i amend my taxes  Additionally, section 6033 provides new disclosure requirements on a tax-exempt entity that is a party to a prohibited tax shelter transaction. How far back can i amend my taxes Tax-exempt entities. How far back can i amend my taxes   Tax-exempt entities that are subject to section 4965 include: Entities described in section 501(c), including but not limited to the following common types of entities: Instrumentalities of the United States described in section 501(c)(1); Churches, hospitals, museums, schools, scientific research organizations, and other charities described in section 501(c)(3); Civic leagues, social welfare organizations, and local associations of employees described in section 501(c)(4); Labor, agricultural, or horticultural organizations described in section 501(c)(5); Business leagues, chambers of commerce, trade associations, and other organizations described in section 501(c)(6); Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9); Credit unions described in section 501(c)(14); Insurance companies described in section 501(c)(15); and Veterans' organizations described in section 501(c)(19). How far back can i amend my taxes Religious or apostolic associations or corporations described in section 501(d). How far back can i amend my taxes Entities described in section 170(c), including states, possessions of the United States, the District of Columbia, political subdivisions of states and political subdivisions of possessions of the United States (but not including the United States). How far back can i amend my taxes Indian tribal governments within the meaning of section 7701(a)(40). How far back can i amend my taxes Entity manager. How far back can i amend my taxes    An entity manager is any person with authority or responsibility similar to that exercised by an officer, director, or trustee, and, for any act, the person that has authority or responsibility with respect to the prohibited transaction. How far back can i amend my taxes Prohibited tax shelter transaction. How far back can i amend my taxes   A prohibited tax shelter transaction is any listed transaction, within the meaning of section 6707A(c)(2), and any prohibited reportable transactions. How far back can i amend my taxes A prohibited reportable transaction is a confidential transaction within the meaning of Regulations section 1. How far back can i amend my taxes 6011-4(b)(3), and a transaction with contractual protection within the meaning of Regulations section 1. How far back can i amend my taxes 6011-4(b)(4). How far back can i amend my taxes See the Instructions for Form 8886 for more information on listed transactions and prohibited reportable transactions. How far back can i amend my taxes Subsequently listed transaction. How far back can i amend my taxes   Any transaction to which the tax-exempt entity is a party and is later determined to be a listed transaction after the entity has become a party to it, is a subsequently listed transaction. How far back can i amend my taxes Entity Level Tax Section 4965(a)(1) imposes an entity level excise tax on any tax-exempt entity described in 1, 2, 3, or 4 above that becomes a party to a prohibited tax shelter transaction or is a party to a subsequently listed transaction (defined earlier). How far back can i amend my taxes The excise tax imposed on a tax-exempt entity applies to tax years in which the entity becomes a party to the prohibited tax shelter transaction and any subsequent tax years. How far back can i amend my taxes The amount of the excise tax depends on whether the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time it became a party to the transaction. How far back can i amend my taxes To figure and report the excise tax imposed on a tax-exempt entity for being a party to a prohibited tax shelter transaction, file Form 4720. How far back can i amend my taxes For more information about this excise tax, including information about how it is figured, see the Instructions for Form 4720. How far back can i amend my taxes Manager Level Tax Section 4965(a)(2) imposes an excise tax on any tax-exempt entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows (or has reason to know) that the transaction is a prohibited tax shelter transaction. How far back can i amend my taxes The excise tax, in the amount of $20,000, is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction. How far back can i amend my taxes To report this tax, file Form 4720. How far back can i amend my taxes Excess Benefit Transactions Excise tax on excess benefit transactions. How far back can i amend my taxes   A disqualified person who benefits from an excess benefit transaction, such as compensation, fringe benefits, or contract payments from certain section 501(c)(3), 501(c)(4), or 501(c)(29) organizations, must correct the transaction and may have to pay an excise tax under section 4958. How far back can i amend my taxes A manager of the organization may also have to pay an excise tax under section 4958. How far back can i amend my taxes These taxes are reported on Form 4720. How far back can i amend my taxes   The excise taxes are imposed if an applicable tax-exempt organization provides an excess benefit to a disqualified person and that benefit exceeds the value of the benefit received in exchange. How far back can i amend my taxes   There are three taxes under section 4958. How far back can i amend my taxes Disqualified persons are liable for the first two taxes and certain organization managers are liable for the third tax. How far back can i amend my taxes    Taxes imposed on excess benefit transactions do not apply to a transaction under a written contract that was binding on September 13, 1995, and at all times thereafter before the transaction occurred. How far back can i amend my taxes Tax on Disqualified Persons An excise tax equal to 25% of the excess benefit is imposed on each excess benefit transaction between an applicable tax-exempt organization and a disqualified person. How far back can i amend my taxes The disqualified person who benefited from the transaction is liable for the tax. How far back can i amend my taxes See definition of Disqualified person, later at Disqualified person. How far back can i amend my taxes Additional tax on the disqualified person. How far back can i amend my taxes   If the 25% tax is imposed and the excess benefit transaction is not corrected within the taxable period, an additional excise tax equal to 200% of the excess benefit is imposed on any disqualified person involved. How far back can i amend my taxes   If a disqualified person makes a payment of less than the full correction amount, the 200% tax is imposed only on the unpaid portion of the correction amount. How far back can i amend my taxes If more than one disqualified person received an excess benefit from an excess benefit transaction, all such disqualified persons are jointly and severally liable for the taxes. How far back can i amend my taxes   To avoid the 200% tax, a disqualified person must correct the excess benefit transaction during the taxable period. How far back can i amend my taxes The 200% tax is abated (refunded if collected) if the excess benefit transaction is corrected within a 90-day correction period beginning on the date a statutory notice of deficiency is issued. How far back can i amend my taxes Taxable period. How far back can i amend my taxes   The taxable period means the period beginning with the date on which the excess benefit transaction occurs and ending on the earlier of: The date a notice of deficiency was mailed to the disqualified person for the initial tax on the excess benefit transaction, or The date on which the initial tax on the excess benefit transaction for the disqualified person is assessed. How far back can i amend my taxes Tax on Organization Managers If tax is imposed on a disqualified person for any excess benefit transaction, an excise tax equal to 10% of the excess benefit is imposed on an organization manager who knowingly participated in an excess benefit transaction, unless such participation was not willful and was due to reasonable cause. How far back can i amend my taxes This tax cannot exceed $20,000 ($10,000 for transactions entered in a tax year beginning before August 18, 2006), for each transaction. How far back can i amend my taxes There is also joint and several liability for this tax. How far back can i amend my taxes A person can be liable for both the tax paid by the disqualified person and the organization manager tax for a particular excess benefit transaction. How far back can i amend my taxes Organization Manager. How far back can i amend my taxes   An organization manager is any officer, director, or trustee of an applicable tax-exempt organization, or any individual having powers or responsibilities similar to officers, directors, or trustees of the organization, regardless of title. How far back can i amend my taxes An organization manager is not considered to have participated in an excess benefit transaction where the manager has opposed the transaction in a manner consistent with the fulfillment of the manager's responsibilities to the organization. How far back can i amend my taxes For example, a director who votes against giving an excess benefit would ordinarily not be subject to the 10% tax. How far back can i amend my taxes A person participates in a transaction knowingly if the person: Has actual knowledge of sufficient facts so that, based solely upon those facts, such transaction would be an excess benefit transaction; Is aware that such a transaction under these circumstances may violate the provisions of federal tax law governing excess benefit transactions; and Negligently fails to make reasonable attempts to ascertain whether the transaction is an excess benefit transaction, or the manager is in fact aware that it is such a transaction. How far back can i amend my taxes Knowing does not mean having reason to know. How far back can i amend my taxes The organization manager ordinarily will not be considered knowing if, after full disclosure of the factual situation to an appropriate professional, the organization manager relied on the professional's reasoned written opinion on matters within the professional's expertise or if the manager relied on the fact that the requirements for the rebuttable presumption of reasonableness have been satisfied. How far back can i amend my taxes Participation by an organization manager is willful if it is voluntary, conscious, and intentional. How far back can i amend my taxes An organization manager's participation is due to reasonable cause if the manager has exercised responsibility on behalf of the organization with ordinary business care and prudence. How far back can i amend my taxes Excess Benefit Transaction An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received for providing such benefit. How far back can i amend my taxes The excess benefit transaction rules apply to all transactions with disqualified persons, regardless of whether the amount of the benefit provided is determined in whole or in part by the revenues of one or more activities of the organization. How far back can i amend my taxes To determine whether an excess benefit transaction has occurred, all consideration and benefits exchanged between a disqualified person and the applicable tax-exempt organization, and all entities it controls, are taken into account. How far back can i amend my taxes For purposes of determining the value of economic benefits, the value of property, including the right to use property, is the fair market value. How far back can i amend my taxes Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts. How far back can i amend my taxes Donor advised fund transactions occurring after August 17, 2006. How far back can i amend my taxes   For a donor advised fund, an excess benefit transaction includes a grant, loan, compensation, or other similar payment from the fund to a: Donor or donor advisor, Family member of a donor, or donor advisor, 35% controlled entity of a donor, or donor advisor, or 35% controlled entity of a family member of a donor, or donor advisor. How far back can i amend my taxes   The excess benefit in this transaction is the amount of the grant, loan, compensation, or other similar payment. How far back can i amend my taxes For additional information, see the Instructions for Form 4720. How far back can i amend my taxes Supporting organization transactions occurring after July 25, 2006. How far back can i amend my taxes   For any supporting organization, defined in section 509(a)(3), an excess benefit transaction includes grants, loans, compensation, or other similar payment provided by the supporting organization to a: Substantial contributor, Family member of a substantial contributor, 35% controlled entity of a substantial contributor, or 35% controlled entity of a family member of a substantial contributor. How far back can i amend my taxes   Additionally, an excess benefit transaction includes any loans provided by the supporting organization to a disqualified person (other than an organization described in section 509(a)(1), (2), or (4)). How far back can i amend my taxes   The excess benefit for substantial contributors and parties related to those contributors includes the amount of the grant, loan, compensation, or other similar payment. How far back can i amend my taxes For additional information, see the Instructions for Form 4720. How far back can i amend my taxes   Excess benefit transaction rules generally do not apply to transactions between a supporting organization and its supported organization described in section 501(c)(4), (5), or (6) in furtherance of charitable purposes. How far back can i amend my taxes Date of Occurrence An excess benefit transaction occurs on the date the disqualified person receives the economic benefit from the organization for federal income tax purposes. How far back can i amend my taxes However, when a single contractual arrangement provides for a series of compensation or other payments to or for the use of a disqualified person during the disqualified person's tax year, any excess benefit transaction with respect to these payments occurs on the last day of the taxpayer's tax year. How far back can i amend my taxes In the case of benefits provided to a qualified pension, profit-sharing, or stock bonus plan, the transaction occurs on the date the benefit is vested. How far back can i amend my taxes In the case of the transfer of property subject to a substantial risk of forfeiture, or in the case of rights to future compensation or property, the transaction occurs on the date the property, or the rights to future compensation or property, is not subject to a substantial risk of forfeiture. How far back can i amend my taxes Where the disqualified person elects to include an amount in gross income in the tax year of transfer under section 83(b), the excess benefit transaction occurs on the date the disqualified person receives the economic benefit for federal income tax purposes. How far back can i amend my taxes Correcting the excess benefit. How far back can i amend my taxes   An excess benefit transaction is corrected by undoing the excess benefit to the extent possible, and by taking any additional measures necessary to place the organization in a financial position not worse than what it would have been if the disqualified person were dealing under the highest fiduciary standards. How far back can i amend my taxes   A disqualified person corrects an excess benefit by making a payment in cash or cash equivalents, excluding payment by a promissory note, equal to the correction amount to the applicable tax-exempt organization. How far back can i amend my taxes The correction amount equals the excess benefit plus the interest on the excess benefit. How far back can i amend my taxes The interest rate can be no lower than the applicable federal rate, compounded annually, for the month the transaction occurred. How far back can i amend my taxes   A disqualified person can, with the agreement of the applicable tax-exempt organization, make a payment by returning the specific property previously transferred in the excess transaction. How far back can i amend my taxes In this case, the disqualified person is treated as making a payment equal to the lesser of: The fair market value of the property on the date the property is returned to the organization, or The fair market value of the property on the date the excess benefit transaction occurred. How far back can i amend my taxes   If the payment resulting from the return of property is less than the correction amount, the disqualified person must make an additional cash payment to the organization equal to the difference. How far back can i amend my taxes   If the payment resulting from the return of the property exceeds the correction amount described above, the organization can make a cash payment to the disqualified person equal to the difference. How far back can i amend my taxes Exception. How far back can i amend my taxes   For a correction of an excess benefit transaction (discussed earlier), no amount repaid in a manner prescribed by the Secretary can be held in a donor advised fund. How far back can i amend my taxes Applicable Tax-Exempt Organization An applicable tax-exempt organization is a section 501(c)(3), 501(c)(4), or 501(c)(29) organization that is tax-exempt under section 501(a), or was such an organization at any time during a 5-year period ending on the day of the excess benefit transaction. How far back can i amend my taxes An applicable tax-exempt organization does not include: A private foundation as defined in section 509(a), A governmental entity that is: Exempt from (or not subject to) taxation without regard to section 501(a), or Not required to file an annual return, or A foreign organization, recognized by the IRS or by treaty, that receives substantially all of its support (other than gross investment income) from sources outside the United States. How far back can i amend my taxes An organization is not treated as a section 501(c)(3), 501(c)(4), or 501(c)(29) organization for any period covered by a final determination that the organization was not tax-exempt under section 501(a), but only if the determination was not based on private inurement or one or more excess benefit transactions. How far back can i amend my taxes Disqualified Person A disqualified person is: Any person (at any time during the 5-year period ending on the date of the transaction) in a position to exercise substantial influence over the affairs of the organization, A family member of an individual described in 1, and A 35% controlled entity. How far back can i amend my taxes For donor advised funds, sponsoring organizations, and certain supporting organizations occurring after August 17, 2006. How far back can i amend my taxes   The following persons will be considered disqualified persons along with certain family members and 35% controlled entities associated with them. How far back can i amend my taxes Donors of donor advised funds, Investment advisors of sponsoring organizations, and Disqualified persons of a section 509(a)(3) supporting organization that supports the applicable tax-exempt organization. How far back can i amend my taxes For certain supporting organization transactions occurring after July 25, 2006. How far back can i amend my taxes   Substantial contributors to supporting organizations will also be considered disqualified persons with respect to the supporting organizations, along with their family members and 35% controlled entities. How far back can i amend my taxes Investment advisor. How far back can i amend my taxes   Investment advisor means for any sponsoring organization, any person compensated by such organization (but not an employee of such organization) for managing the investment of, or providing investment advice for, assets maintained in donor advised funds owned by such sponsoring organization. How far back can i amend my taxes Substantial contributor. How far back can i amend my taxes   In general, a substantial contributor means any person who contributed or bequeathed an aggregate of more than $5,000 to the organization, if that amount is more than 2% of the total contributions and bequests received by the end of the organization's tax year in which the contribution or bequest is received. How far back can i amend my taxes A substantial contributor includes the grantor of a trust. How far back can i amend my taxes Family members. How far back can i amend my taxes   Family members of a disqualified person include a disqualified person's spouse, brothers or sisters (whether by whole or half-blood), spouses of brothers or sisters (whether by whole or half-blood), ancestors, children (including a legally adopted child), grandchildren, great grandchildren, and spouses of children, grandchildren, and great grandchildren (whether by whole or half-blood). How far back can i amend my taxes 35% controlled entity. How far back can i amend my taxes   A 35% controlled entity is: A corporation in which disqualified persons own more than 35% of the total combined voting power, A partnership in which such persons own more than 35% of the profits interest, or A trust or estate in which such persons own more than 35% of the beneficial interest. How far back can i amend my taxes   In determining the holdings of a business enterprise, any stock or other interest owned directly or indirectly shall apply. How far back can i amend my taxes Persons having substantial influence. How far back can i amend my taxes   Among those who are in a position to exercise substantial influence over the affairs of the organization are, for example, voting members of the governing body, and persons holding the power of: Presidents, chief executives, or chief operating officers. How far back can i amend my taxes Treasurers and chief financial officers. How far back can i amend my taxes Persons with a material financial interest in a provider-sponsored organization. How far back can i amend my taxes Persons not considered to have substantial influence. How far back can i amend my taxes   Persons who are not considered to be in a position to exercise substantial influence over the affairs of an organization include: An employee who receives benefits that total less than the highly compensated amount in section 414(q)(1)(B)(i) and who does not hold the executive or voting powers mentioned earlier in the discussion on Disqualified Person, is not a family member of a disqualified person, and is not a substantial contributor, Tax-exempt organizations described in section 501(c)(3), and Section 501(c)(4) organizations with respect to transactions engaged in with other section 501(c)(4) organizations. How far back can i amend my taxes Facts and circumstances. How far back can i amend my taxes   The determination of whether a person has substantial influence over the affairs of an organization is based on all the facts and circumstances. How far back can i amend my taxes Facts and circumstances that tend to show a person has substantial influence over the affairs of an organization include, but are not limited to, the following. How far back can i amend my taxes The person founded the organization. How far back can i amend my taxes The person is a substantial contributor to the organization under the section 507(d)(2)(A) definition, only taking into account contributions to the organization for the past 5 years. How far back can i amend my taxes The person's compensation is primarily based on revenues derived from activities of the organization that the person controls. How far back can i amend my taxes The person has or shares authority to control or determine a substantial portion of the organization's capital expenditures, operating budget, or compensation for employees. How far back can i amend my taxes The person manages a discrete segment or activity of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. How far back can i amend my taxes The person owns a controlling interest (measured by either vote or value) in a corporation, partnership, or trust that is a disqualified person. How far back can i amend my taxes The person is a nonstock organization controlled directly or indirectly by one or more disqualified persons. How far back can i amend my taxes   Facts and circumstances tending to show that a person does not have substantial influence over the affairs of an organization include, but are not limited to, the following. How far back can i amend my taxes The person has taken a bona fide vow of poverty as an employee or agent of a religious organization or on its behalf. How far back can i amend my taxes The person is an independent contractor whose sole relationship to the organization is providing professional advice (without having decision-making authority) with respect to transactions from which the independent contractor will not economically benefit either directly or indirectly aside from customary fees received for the professional advice rendered. How far back can i amend my taxes Any preferential treatment the person receives based on the size of the person's donation is also offered to others making comparable widely solicited donations. How far back can i amend my taxes The direct supervisor of the person is not a disqualified person. How far back can i amend my taxes The person does not participate in any management decisions affecting the organization as a whole or a discrete segment of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. How far back can i amend my taxes   In the case of multiple organizations affiliated by common control or governing documents, the determination of whether a person does or does not have substantial influence is made separately for each applicable tax-exempt organization. How far back can i amend my taxes A person may be a disqualified person with respect to transactions with more than one organization. How far back can i amend my taxes Reasonable Compensation. How far back can i amend my taxes    Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. How far back can i amend my taxes The section 162 standard will apply in determining the reasonableness of compensation. How far back can i amend my taxes The fact that a bonus or revenue-sharing arrangement is subject to a cap is a relevant factor in determining reasonableness of compensation. How far back can i amend my taxes   To determine the reasonableness of compensation, all items of compensation provided by an applicable tax-exempt organization in exchange for performance of services are taken into account in determining the value of compensation (except for economic benefits that are disregarded under the discussion Disregarded benefits , later). How far back can i amend my taxes Items of compensation include: All forms of cash and noncash compensation, including salary, fees, bonuses, severance payments, and deferred noncash compensation, The payment of liability insurance premiums for, or the payment or reimbursement by the organization of penalties, taxes, or certain expenses under section 4958, unless excludable from income as a de minimis fringe benefit under section 132(a)(4), All other compensatory benefits, whether or not included in gross income for income tax purposes, Taxable and nontaxable fringe benefits, except fringe benefits described in section 132, and Foregone interest on loans. How far back can i amend my taxes    Intent to treat benefits as compensation. How far back can i amend my taxes An economic benefit is not treated as consideration for the performance of services unless the organization providing the benefit clearly indicates its intent to treat the benefit as compensation when the benefit is paid. How far back can i amend my taxes   An applicable tax-exempt organization (or entity that it controls) is treated as clearly indicating its intent to provide an economic benefit as compensation for services only if the organization provides written substantiation that is contemporaneous with the transfer of the economic benefits under consideration. How far back can i amend my taxes Ways to provide contemporaneous written substantiation of its intent to provide an economic benefit as compensation include: The organization produces a signed written employment contract, The organization reports the benefit as compensation on an original Form W-2, Form 1099, or Form 990, or on an amended form filed before starting an IRS examination, or The disqualified person reports the benefit as income on the person's original Form 1040, or on an amended form filed before starting an IRS examination. How far back can i amend my taxes Exception. How far back can i amend my taxes   If the economic benefit is excluded from the disqualified person's gross income for income tax purposes, the applicable tax-exempt organization is not required to indicate its intent to provide an economic benefit as compensation for services. How far back can i amend my taxes Rebuttable presumption that a transaction is not an excess benefit transaction. How far back can i amend my taxes   Payments under a compensation arrangement are presumed to be reasonable and the transfer of property (or right to use property) is presumed to be at fair market value, if the following three conditions are met. How far back can i amend my taxes The transaction is approved in advance by an authorized body of the organization (or an entity it controls) which is composed of individuals who do not have a conflict of interest concerning the transaction. How far back can i amend my taxes Before making its determination, the authorized body obtained and relied upon appropriate data as to comparability. How far back can i amend my taxes (There is a special safe harbor for small organizations. How far back can i amend my taxes If the organization has gross receipts of less than $1 million, appropriate comparability data includes data on compensation paid by three comparable organizations in the same or similar communities for similar services. How far back can i amend my taxes ) The authorized body adequately documents the basis for its determination concurrently with making that determination. How far back can i amend my taxes The documentation should include: The terms of the approved transaction and the date approved, The members of the authorized body who were present during debate on the transaction that was approved and those who voted on it, The comparability data obtained and relied upon by the authorized body and how the data was obtained, Any actions by a member of the authorized body having conflict of interest, and Documentation of the basis of the determination before the later of the next meeting of the authorized body or 60 days after the final actions of the authorized body are taken, and approval of records as reasonable, accurate, and complete within a reasonable time thereafter. How far back can i amend my taxes Disregarded benefits. How far back can i amend my taxes   The following economic benefits are disregarded for section 4958 purposes. How far back can i amend my taxes Nontaxable fringe benefits that are excluded from income under section 132. How far back can i amend my taxes Benefits provided to a volunteer for the organization if the benefit is provided to the general public in exchange for a membership fee or contribution of $75 or less. How far back can i amend my taxes Benefits provided to a member of an organization due to the payment of a membership fee or to a donor as a result of a deductible contribution, if a significant number of disqualified persons make similar payments or contributions and are offered a similar economic benefit. How far back can i amend my taxes Benefits provided to a person solely as a member of a charitable class that the applicable tax-exempt organization intends to benefit as part of the accomplishment of its exempt purpose. How far back can i amend my taxes A transfer of an economic benefit to or for the use of a governmental unit, as defined in section 170(c)(1), if exclusively for public purposes. How far back can i amend my taxes Special Exception for Initial Contracts      Section 4958 does not apply to any fixed payment made to a person under an initial contract. How far back can i amend my taxes   A fixed payment is an amount of cash or other property specified in the contract, or determined by a fixed formula that is specified in the contract, which is to be paid or transferred in exchange for the provision of specified services or property. How far back can i amend my taxes   A fixed formula can, generally, incorporate an amount that depends upon future specified events or contingencies, as long as no one has discretion when calculating the amount of a payment or deciding whether to make a payment (such as a bonus). How far back can i amend my taxes   An initial contract is a binding written contract between an applicable tax-exempt organization and a person who was not a disqualified person immediately before entering into the contract. How far back can i amend my taxes   A binding written contract, providing it can be terminated or canceled by the applicable tax-exempt organization without the other party's consent (except as a result of substantial nonperformance) and without substantial penalty, is treated as a new contract, as of the earliest date any termination or cancellation would be effective. How far back can i amend my taxes Also, if the parties make a material change to a contract, which includes an extension or renewal of the contract (except for an extension or renewal resulting from the exercise of an option by the disqualified person), or a more than incidental change to the amount payable under the contract, it is treated as a new contract as of the effective date of the material change. How far back can i amend my taxes More information. How far back can i amend my taxes   For more information, see the Instructions to Forms 990 and 4720. How far back can i amend my taxes Excess Business Holdings Private foundations are generally not permitted to hold more than a 20% interest in an unrelated business enterprise. How far back can i amend my taxes They may be subject to an excise tax on the amount of any excess business holdings. How far back can i amend my taxes For purposes of section 4943, for tax years beginning after August 17, 2006, donor advised funds and certain supporting organizations are considered private foundations. How far back can i amend my taxes Donor advised fund. How far back can i amend my taxes   In general, a donor advised fund is a fund or account separately identified by reference to contributions of a donor or donors that is owned and controlled by a sponsoring organization and for which the donor has or expects to have advisory privileges concerning the distribution or investment of the funds. How far back can i amend my taxes Supporting organizations. How far back can i amend my taxes   Only certain supporting organizations are subject to the excess business holdings tax under section 4943. How far back can i amend my taxes These include (1) Type III supporting organizations that are not functionally integrated and (2) Type II supporting organizations that accept any gift or contribution from a person who by himself or in connection with a related party controls the supported organization that the Type II supporting organization supports. How far back can i amend my taxes Taxes. How far back can i amend my taxes   A private foundation that has excess holdings in a business enterprise may become liable for an excise tax based on the amount of holdings. How far back can i amend my taxes The initial tax is 10% (5% for tax years beginning before August 18, 2006) of the value of the excess holdings and is imposed on the last day of each tax year that ends during the taxable period. How far back can i amend my taxes The excess holdings are determined on the day during the tax year when they were the largest. How far back can i amend my taxes   A foundation that fails to correct the excess business holdings becomes liable for an additional tax of 200% of the remaining excess business holdings as of the earlier of tax assessment or mailing of a notice of deficiency. How far back can i amend my taxes   For more information on the tax on excess business holdings, see the Instructions for Form 4720. How far back can i amend my taxes Taxable Distributions of Sponsoring Organizations An excise tax is imposed on a sponsoring organization for each taxable distribution it makes from a donor advised fund. How far back can i amend my taxes An excise tax is also imposed on any fund manager of the sponsoring organization who agreed to the making of a distribution, knowing that it is a taxable distribution. How far back can i amend my taxes Taxable distribution. How far back can i amend my taxes   A taxable distribution is any distribution from a donor advised fund to any natural person or to any other person if: The distribution is for any purpose other than one specified in section 170(c)(2)(B), or The sponsoring organization maintaining the donor advised fund does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h). How far back can i amend my taxes    However, a taxable distribution does not include a distribution from a donor advised fund to: Any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), The sponsoring organization of the donor advised fund, or Any other donor advised fund. How far back can i amend my taxes The tax on taxable distributions applies to distributions occurring in tax years beginning after August 17, 2006. How far back can i amend my taxes Sponsoring organization. How far back can i amend my taxes   A sponsoring organization is a section 170(c) organization that is neither a government organization (as referred to in section 170(c)(1) and (2)(A)) nor a private foundation. How far back can i amend my taxes Donor advised fund. How far back can i amend my taxes    A donor advised fund is a fund or account: Which is separately identified by reference to contributions of a donor or donors, Which is owned and controlled by a sponsoring organization, and For which the donor (or any person appointed or designated by the donor) has or expects to have advisory privileges concerning the distribution or investment of the funds held in the donor advised funds or accounts because of the donor's status as a donor. How far back can i amend my taxes Exception. How far back can i amend my taxes A donor advised fund does not include:    A fund or account that makes distributions only to a single identified organization or governmental entity, or Any fund or account for a person described in 3 above that gives advice about which individuals receive grants for travel, study, or similar purposes, if the following three requirements are met: The person's advisory privileges are performed exclusively by such person in their capacity as a committee member of which all the committee members are appointed by the sponsoring organization, No combination of persons with advisory privileges, described in 3 above, or persons related to those in 3 above directly or indirectly control the committee, and All grants from the fund or account are awarded on an objective and nondiscriminatory basis according to a procedure approved in advance by the board of directors of the sponsoring organization. How far back can i amend my taxes The procedure must be designed to ensure that all grants meet the requirements of section 4945(g)(1), (2), or (3). How far back can i amend my taxes Disqualified supporting organization. How far back can i amend my taxes   A disqualified supporting organization includes (1) a Type III supporting organization that is not functionally integrated and (2) any supporting organization where the donor or donor advisor (and any related parties) directly or indirectly controls a supported organization of the supporting organization. How far back can i amend my taxes Tax on sponsoring organization. How far back can i amend my taxes   A tax of 20% of the amount of each taxable distribution is imposed on the sponsoring organization. How far back can i amend my taxes Tax on fund manager. How far back can i amend my taxes   If a tax is imposed on a taxable distribution of the sponsoring organization, a tax of 5% of the distribution will be imposed on any fund manager who agreed to the distribution knowing that it was a taxable distribution. How far back can i amend my taxes Any fund manager who took part in the distribution and is liable for the tax must pay the tax. How far back can i amend my taxes The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. How far back can i amend my taxes If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. How far back can i amend my taxes   For more information on the tax on taxable distributions of sponsoring organizations, see the Instructions for Form 4720. How far back can i amend my taxes Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Prohibited benefit. How far back can i amend my taxes   If any donor, donor advisor, or related party advises the sponsoring organization about making a distribution which results in a donor, donor advisor, or related party receiving (either directly or indirectly) a more than incidental benefit, then such benefit is a prohibited benefit. How far back can i amend my taxes The tax on prohibited benefits applies to distributions occurring in tax years beginning after August 17, 2006. How far back can i amend my taxes Donor advisor. How far back can i amend my taxes   A donor advisor is any person appointed or designated by a donor to advise a sponsoring organization on the distribution or investment of amounts held in the donor's fund or account. How far back can i amend my taxes Related party. How far back can i amend my taxes   A related party includes any family member or 35% controlled entity. How far back can i amend my taxes See the definition of those terms under Disqualified Person , earlier. How far back can i amend my taxes Tax on donor, donor advisor, or related person. How far back can i amend my taxes    A tax of 125% of the benefit resulting from the distribution is imposed on both the party who advised as to the distribution (which might be a donor, donor advisor, or related party) and the party who received such benefit (which might be a donor, donor advisor, or related party). How far back can i amend my taxes The advisor and the party who received the benefit are jointly and severally liable for the tax. How far back can i amend my taxes Tax on fund managers. How far back can i amend my taxes   If a tax is imposed on a prohibited benefit received by a donor, donor advisor, or related person, a tax of 10% of the amount of the prohibited benefit is imposed on any fund manager who agreed to the distribution knowing that it would confer a prohibited benefit. How far back can i amend my taxes Any fund manager who took part in the distribution and is liable for the tax must pay the tax. How far back can i amend my taxes The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. How far back can i amend my taxes If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. How far back can i amend my taxes Exception. How far back can i amend my taxes   If a person engaged in an excess benefit transaction and received a prohibited benefit for the same transaction, the person is taxed under section 4958, and no tax is imposed under section 4967 for a prohibited benefit. How far back can i amend my taxes   For more information on taxes on prohibited benefits distributed from donor advised funds, see the Instructions for Form 4720. How far back can i amend my taxes Excise Taxes on Private Foundations There is an excise tax on the net investment income of most domestic private foundations. How far back can i amend my taxes Capital gains from appreciation are included in the tax base on private foundation net investment income. How far back can i amend my taxes This tax must be reported on Form 990-PF and must be paid annually at the time for filing that return or in quarterly estimated tax payments if the total tax for the year (section 4940 tax minus credits) is $500 or more. How far back can i amend my taxes Form 990-W is used to calculate the estimated tax. How far back can i amend my taxes In addition, there are several other rules that apply to excise taxes on private foundations. How far back can i amend my taxes These include: Restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons, Requirements that the foundation annually distribute income for charitable purposes, Limits on their holdings in any business enterprise (see Excess Business Holdings, earlier), Provisions that investments must not jeopardize the carrying out of exempt purposes, and Provisions to assure that expenditures further the organization's exempt purposes. How far back can i amend my taxes Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons. How far back can i amend my taxes For more information on the excise taxes imposed on private foundations, see the Instructions for Form 4720 and the Instructions for Form 990-PF. How far back can i amend my taxes Excise Taxes on Black Lung Benefit Trusts A black lung benefit trust that makes any expenditures, payments, or investments other than those described in chapter 4 under 501(c)(21) - Black Lung Benefit Trusts must pay a tax equal to 10% of the amount of such expenditures. How far back can i amend my taxes If there are any acts of self-dealing between the trust and a disqualified person, a tax equal to 10% of the amount involved is imposed on the disqualified person. How far back can i amend my taxes Both of these excise taxes are reported on Schedule A (Form 990-BL). How far back can i amend my taxes See the Form 990-BL instructions for more information on these taxes and what has to be filed, even if the trust is excepted from filing. How far back can i amend my taxes Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements For tax years beginning after March 23, 2012, new section 4959 imposes an excise tax on hospital organizations which fail to meet certain section 501(r) requirements for each of their hospital facilities. How far back can i amend my taxes These entities must meet section 501(r)(3) requirements at all times during their tax year. How far back can i amend my taxes Section 501(r)(3) requirements pertain to a hospital organization preparing a community health needs assessment (CHNA). How far back can i amend my taxes See Schedule H, Hospitals (Form 990), for details. How far back can i amend my taxes Prev  Up  Next   Home   More Online Publications
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The Agency, its Mission and Statutory Authority

The Agency
The IRS is a bureau of the Department of the Treasury and one of the world's most efficient tax administrators. In fiscal year 2012, the IRS collected more than $2.5 trillion in revenue and processed more than 237 million tax returns.

  • The IRS spent just 48 cents for each $100 it collected in FY 2012.
    (Source: Table 29, IRS 2012 Data Book.)

 


The IRS Mission
Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

This mission statement describes our role and the public’s expectation about how we should perform that role.

  • In the United States, the Congress passes tax laws and requires taxpayers to comply.
  • The taxpayer’s role is to understand and meet his or her tax obligations.
  • The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.

 


Statutory Authority
The IRS is organized to carry out the responsibilities of the secretary of the Treasury under section 7801 of the Internal Revenue Code. The secretary has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant.

Section 7803 of the Internal Revenue Code provides for the appointment of a commissioner of Internal Revenue to administer and supervise the execution and application of the internal revenue laws.


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Page Last Reviewed or Updated: 12-Feb-2014

The How Far Back Can I Amend My Taxes

How far back can i amend my taxes 9. How far back can i amend my taxes   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. How far back can i amend my taxes Depletion unit. How far back can i amend my taxes Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. How far back can i amend my taxes The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. How far back can i amend my taxes There are two ways of figuring depletion: cost depletion and percentage depletion. How far back can i amend my taxes For mineral property, you generally must use the method that gives you the larger deduction. How far back can i amend my taxes For standing timber, you must use cost depletion. How far back can i amend my taxes Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. How far back can i amend my taxes More than one person can have an economic interest in the same mineral deposit or timber. How far back can i amend my taxes In the case of leased property, the depletion deduction is divided between the lessor and the lessee. How far back can i amend my taxes You have an economic interest if both the following apply. How far back can i amend my taxes You have acquired by investment any interest in mineral deposits or standing timber. How far back can i amend my taxes You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. How far back can i amend my taxes A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. How far back can i amend my taxes A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. How far back can i amend my taxes Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. How far back can i amend my taxes Basis adjustment for depletion. How far back can i amend my taxes   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. How far back can i amend my taxes Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). How far back can i amend my taxes For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. How far back can i amend my taxes You can treat two or more separate interests as one property or as separate properties. How far back can i amend my taxes See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. How far back can i amend my taxes There are two ways of figuring depletion on mineral property. How far back can i amend my taxes Cost depletion. How far back can i amend my taxes Percentage depletion. How far back can i amend my taxes Generally, you must use the method that gives you the larger deduction. How far back can i amend my taxes However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. How far back can i amend my taxes See Oil and Gas Wells , later. How far back can i amend my taxes Cost Depletion To figure cost depletion you must first determine the following. How far back can i amend my taxes The property's basis for depletion. How far back can i amend my taxes The total recoverable units of mineral in the property's natural deposit. How far back can i amend my taxes The number of units of mineral sold during the tax year. How far back can i amend my taxes Basis for depletion. How far back can i amend my taxes   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. How far back can i amend my taxes Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. How far back can i amend my taxes The residual value of land and improvements at the end of operations. How far back can i amend my taxes The cost or value of land acquired for purposes other than mineral production. How far back can i amend my taxes Adjusted basis. How far back can i amend my taxes   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. How far back can i amend my taxes Your adjusted basis can never be less than zero. How far back can i amend my taxes See Publication 551, Basis of Assets, for more information on adjusted basis. How far back can i amend my taxes Total recoverable units. How far back can i amend my taxes   The total recoverable units is the sum of the following. How far back can i amend my taxes The number of units of mineral remaining at the end of the year (including units recovered but not sold). How far back can i amend my taxes The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). How far back can i amend my taxes   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. How far back can i amend my taxes You must include ores and minerals that are developed, in sight, blocked out, or assured. How far back can i amend my taxes You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. How far back can i amend my taxes But see Elective safe harbor for owners of oil and gas property , later. How far back can i amend my taxes Number of units sold. How far back can i amend my taxes   You determine the number of units sold during the tax year based on your method of accounting. How far back can i amend my taxes Use the following table to make this determination. How far back can i amend my taxes    IF you  use . How far back can i amend my taxes . How far back can i amend my taxes . How far back can i amend my taxes THEN the units sold during the year are . How far back can i amend my taxes . How far back can i amend my taxes . How far back can i amend my taxes The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). How far back can i amend my taxes An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. How far back can i amend my taxes   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. How far back can i amend my taxes Figuring the cost depletion deduction. How far back can i amend my taxes   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. How far back can i amend my taxes Step Action Result 1 Divide your property's basis for depletion by total recoverable units. How far back can i amend my taxes Rate per unit. How far back can i amend my taxes 2 Multiply the rate per unit by units sold during the tax year. How far back can i amend my taxes Cost depletion deduction. How far back can i amend my taxes You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. How far back can i amend my taxes Elective safe harbor for owners of oil and gas property. How far back can i amend my taxes   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. How far back can i amend my taxes If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). How far back can i amend my taxes For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. How far back can i amend my taxes irs. How far back can i amend my taxes gov/pub/irs-irbs/irb04-10. How far back can i amend my taxes pdf. How far back can i amend my taxes   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. How far back can i amend my taxes The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. How far back can i amend my taxes The election, if made, is effective for the tax year in which it is made and all later years. How far back can i amend my taxes It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. How far back can i amend my taxes Once revoked, it cannot be re-elected for the next 5 years. How far back can i amend my taxes Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. How far back can i amend my taxes The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . How far back can i amend my taxes Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . How far back can i amend my taxes Gross income. How far back can i amend my taxes   When figuring percentage depletion, subtract from your gross income from the property the following amounts. How far back can i amend my taxes Any rents or royalties you paid or incurred for the property. How far back can i amend my taxes The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. How far back can i amend my taxes A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. How far back can i amend my taxes   Use the following fraction to figure the part of the bonus you must subtract. How far back can i amend my taxes No. How far back can i amend my taxes of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. How far back can i amend my taxes For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. How far back can i amend my taxes Taxable income limit. How far back can i amend my taxes   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. How far back can i amend my taxes   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. How far back can i amend my taxes These deductible items include, but are not limited to, the following. How far back can i amend my taxes Operating expenses. How far back can i amend my taxes Certain selling expenses. How far back can i amend my taxes Administrative and financial overhead. How far back can i amend my taxes Depreciation. How far back can i amend my taxes Intangible drilling and development costs. How far back can i amend my taxes Exploration and development expenditures. How far back can i amend my taxes Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. How far back can i amend my taxes Losses sustained. How far back can i amend my taxes   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. How far back can i amend my taxes Do not deduct any net operating loss deduction from the gross income from the property. How far back can i amend my taxes Corporations do not deduct charitable contributions from the gross income from the property. How far back can i amend my taxes If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. How far back can i amend my taxes See section 1. How far back can i amend my taxes 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. How far back can i amend my taxes Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. How far back can i amend my taxes You are either an independent producer or a royalty owner. How far back can i amend my taxes The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. How far back can i amend my taxes If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. How far back can i amend my taxes For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. How far back can i amend my taxes Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. How far back can i amend my taxes However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. How far back can i amend my taxes For information on figuring the deduction, see Figuring percentage depletion , later. How far back can i amend my taxes Refiners who cannot claim percentage depletion. How far back can i amend my taxes   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. How far back can i amend my taxes The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. How far back can i amend my taxes Related person. How far back can i amend my taxes   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. How far back can i amend my taxes For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. How far back can i amend my taxes A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. How far back can i amend my taxes For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. How far back can i amend my taxes The value of the outstanding stock of a corporation. How far back can i amend my taxes The interest in the profits or capital of a partnership. How far back can i amend my taxes The beneficial interests in an estate or trust. How far back can i amend my taxes Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. How far back can i amend my taxes Retailers who cannot claim percentage depletion. How far back can i amend my taxes   You cannot claim percentage depletion if both the following apply. How far back can i amend my taxes You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. How far back can i amend my taxes Through a retail outlet operated by you or a related person. How far back can i amend my taxes To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. How far back can i amend my taxes To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. How far back can i amend my taxes The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. How far back can i amend my taxes   For the purpose of determining if this rule applies, do not count the following. How far back can i amend my taxes Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. How far back can i amend my taxes Bulk sales of aviation fuels to the Department of Defense. How far back can i amend my taxes Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. How far back can i amend my taxes Related person. How far back can i amend my taxes   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. How far back can i amend my taxes Sales through a related person. How far back can i amend my taxes   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. How far back can i amend my taxes   You are not considered to be selling through a related person who is a retailer if all the following apply. How far back can i amend my taxes You do not have a significant ownership interest in the retailer. How far back can i amend my taxes You sell your production to persons who are not related to either you or the retailer. How far back can i amend my taxes The retailer does not buy oil or natural gas from your customers or persons related to your customers. How far back can i amend my taxes There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. How far back can i amend my taxes Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. How far back can i amend my taxes Transferees who cannot claim percentage depletion. How far back can i amend my taxes   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. How far back can i amend my taxes For a definition of the term “transfer,” see section 1. How far back can i amend my taxes 613A-7(n) of the regulations. How far back can i amend my taxes For a definition of the term “interest in proven oil or gas property,” see section 1. How far back can i amend my taxes 613A-7(p) of the regulations. How far back can i amend my taxes Figuring percentage depletion. How far back can i amend my taxes   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. How far back can i amend my taxes If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. How far back can i amend my taxes If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. How far back can i amend my taxes   In addition, there is a limit on the percentage depletion deduction. How far back can i amend my taxes See Taxable income limit , later. How far back can i amend my taxes Average daily production. How far back can i amend my taxes   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. How far back can i amend my taxes Partial interest. How far back can i amend my taxes   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. How far back can i amend my taxes   You have a partial interest in the production from a property if you have a net profits interest in the property. How far back can i amend my taxes To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. How far back can i amend my taxes To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. How far back can i amend my taxes Then multiply the total production from the property by your percentage participation to figure your share of the production. How far back can i amend my taxes Example. How far back can i amend my taxes Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. How far back can i amend my taxes During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. How far back can i amend my taxes Javier had expenses of $90,000 attributable to the property. How far back can i amend my taxes The property generated a net profit of $110,000 ($200,000 − $90,000). How far back can i amend my taxes Pablo received income of $22,000 ($110,000 × . How far back can i amend my taxes 20) for his net profits interest. How far back can i amend my taxes Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). How far back can i amend my taxes Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). How far back can i amend my taxes Depletable oil or natural gas quantity. How far back can i amend my taxes   Generally, your depletable oil quantity is 1,000 barrels. How far back can i amend my taxes Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. How far back can i amend my taxes If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. How far back can i amend my taxes Example. How far back can i amend my taxes You have both oil and natural gas production. How far back can i amend my taxes To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. How far back can i amend my taxes Your depletable natural gas quantity is 2. How far back can i amend my taxes 16 million cubic feet of gas (360 × 6000). How far back can i amend my taxes You must reduce your depletable oil quantity to 640 barrels (1000 − 360). How far back can i amend my taxes If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. How far back can i amend my taxes Also, see Notice 2012-50, available at www. How far back can i amend my taxes irs. How far back can i amend my taxes gov/irb/2012–31_IRB/index. How far back can i amend my taxes html. How far back can i amend my taxes Business entities and family members. How far back can i amend my taxes   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. How far back can i amend my taxes Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). How far back can i amend my taxes You and your spouse and minor children. How far back can i amend my taxes A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. How far back can i amend my taxes Controlled group of corporations. How far back can i amend my taxes   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. How far back can i amend my taxes They share the depletable quantity. How far back can i amend my taxes A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. How far back can i amend my taxes ” Gross income from the property. How far back can i amend my taxes   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. How far back can i amend my taxes If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. How far back can i amend my taxes   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. How far back can i amend my taxes   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. How far back can i amend my taxes Average daily production exceeds depletable quantities. How far back can i amend my taxes   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. How far back can i amend my taxes Figure your average daily production of oil or natural gas for the year. How far back can i amend my taxes Figure your depletable oil or natural gas quantity for the year. How far back can i amend my taxes Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. How far back can i amend my taxes Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). How far back can i amend my taxes This is your depletion allowance for that property for the year. How far back can i amend my taxes Taxable income limit. How far back can i amend my taxes   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. How far back can i amend my taxes 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. How far back can i amend my taxes For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. How far back can i amend my taxes 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. How far back can i amend my taxes You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. How far back can i amend my taxes Add it to your depletion allowance (before applying any limits) for the following year. How far back can i amend my taxes Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. How far back can i amend my taxes (However, see Electing large partnerships must figure depletion allowance , later. How far back can i amend my taxes ) Each partner or shareholder must decide whether to use cost or percentage depletion. How far back can i amend my taxes If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. How far back can i amend my taxes Partner's or shareholder's adjusted basis. How far back can i amend my taxes   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. How far back can i amend my taxes The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. How far back can i amend my taxes   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. How far back can i amend my taxes However, in some cases, it is figured according to the partner's interest in partnership income. How far back can i amend my taxes   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. How far back can i amend my taxes Recordkeeping. How far back can i amend my taxes Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. How far back can i amend my taxes The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. How far back can i amend my taxes The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. How far back can i amend my taxes Reporting the deduction. How far back can i amend my taxes   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). How far back can i amend my taxes Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). How far back can i amend my taxes The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. How far back can i amend my taxes The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. How far back can i amend my taxes Form 6198, At-Risk Limitations. How far back can i amend my taxes Form 8582, Passive Activity Loss Limitations. How far back can i amend my taxes Electing large partnerships must figure depletion allowance. How far back can i amend my taxes   An electing large partnership, rather than each partner, generally must figure the depletion allowance. How far back can i amend my taxes The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. How far back can i amend my taxes Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. How far back can i amend my taxes   An electing large partnership is one that meets both the following requirements. How far back can i amend my taxes The partnership had 100 or more partners in the preceding year. How far back can i amend my taxes The partnership chooses to be an electing large partnership. How far back can i amend my taxes Disqualified persons. How far back can i amend my taxes   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. How far back can i amend my taxes Disqualified persons must figure it themselves, as explained earlier. How far back can i amend my taxes   All the following are disqualified persons. How far back can i amend my taxes Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). How far back can i amend my taxes Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). How far back can i amend my taxes Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. How far back can i amend my taxes Average daily production is discussed earlier. How far back can i amend my taxes Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. How far back can i amend my taxes Natural gas sold under a fixed contract. How far back can i amend my taxes   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. How far back can i amend my taxes This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. How far back can i amend my taxes The contract must have been in effect from February 1, 1975, until the date of sale of the gas. How far back can i amend my taxes Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. How far back can i amend my taxes Natural gas from geopressured brine. How far back can i amend my taxes   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. How far back can i amend my taxes This is natural gas that is both the following. How far back can i amend my taxes Produced from a well you began to drill after September 1978 and before 1984. How far back can i amend my taxes Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. How far back can i amend my taxes Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. How far back can i amend my taxes Mines and other natural deposits. How far back can i amend my taxes   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. How far back can i amend my taxes   The following is a list of the percentage depletion rates for the more common minerals. How far back can i amend my taxes DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. How far back can i amend my taxes Corporate deduction for iron ore and coal. How far back can i amend my taxes   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). How far back can i amend my taxes Gross income from the property. How far back can i amend my taxes   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. How far back can i amend my taxes Mining includes all the following. How far back can i amend my taxes Extracting ores or minerals from the ground. How far back can i amend my taxes Applying certain treatment processes described later. How far back can i amend my taxes Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. How far back can i amend my taxes Excise tax. How far back can i amend my taxes   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. How far back can i amend my taxes Extraction. How far back can i amend my taxes   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. How far back can i amend my taxes This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. How far back can i amend my taxes Treatment processes. How far back can i amend my taxes   The processes included as mining depend on the ore or mineral mined. How far back can i amend my taxes To qualify as mining, the treatment processes must be applied by the mine owner or operator. How far back can i amend my taxes For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. How far back can i amend my taxes Transportation of more than 50 miles. How far back can i amend my taxes   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. How far back can i amend my taxes    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. How far back can i amend my taxes Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. How far back can i amend my taxes For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. How far back can i amend my taxes irs. How far back can i amend my taxes gov/irb/2013-01_IRB/ar11. How far back can i amend my taxes html. How far back can i amend my taxes Disposal of coal or iron ore. How far back can i amend my taxes   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. How far back can i amend my taxes You disposed of it after holding it for more than 1 year. How far back can i amend my taxes You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. How far back can i amend my taxes Treat any gain on the disposition as a capital gain. How far back can i amend my taxes Disposal to related person. How far back can i amend my taxes   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. How far back can i amend my taxes A related person (as listed in chapter 2 of Publication 544). How far back can i amend my taxes A person owned or controlled by the same interests that own or control you. How far back can i amend my taxes Geothermal deposits. How far back can i amend my taxes   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. How far back can i amend my taxes A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. How far back can i amend my taxes For percentage depletion purposes, a geothermal deposit is not considered a gas well. How far back can i amend my taxes   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. How far back can i amend my taxes See Gross income from the property , earlier, under Oil and Gas Wells. How far back can i amend my taxes Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. How far back can i amend my taxes Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. How far back can i amend my taxes A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. How far back can i amend my taxes Bonuses and advanced royalties. How far back can i amend my taxes   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. How far back can i amend my taxes If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. How far back can i amend my taxes Figuring cost depletion. How far back can i amend my taxes   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. How far back can i amend my taxes To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. How far back can i amend my taxes Figuring percentage depletion. How far back can i amend my taxes   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . How far back can i amend my taxes Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. How far back can i amend my taxes However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. How far back can i amend my taxes Ending the lease. How far back can i amend my taxes   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. How far back can i amend my taxes Do this for the year the lease ends or is abandoned. How far back can i amend my taxes Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. How far back can i amend my taxes   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. How far back can i amend my taxes Include this amount in income for the year the lease ends. How far back can i amend my taxes Increase your adjusted basis in the property by the amount you include in income. How far back can i amend my taxes Delay rentals. How far back can i amend my taxes   These are payments for deferring development of the property. How far back can i amend my taxes Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. How far back can i amend my taxes These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. How far back can i amend my taxes Timber You can figure timber depletion only by the cost method. How far back can i amend my taxes Percentage depletion does not apply to timber. How far back can i amend my taxes Base your depletion on your cost or other basis in the timber. How far back can i amend my taxes Your cost does not include the cost of land or any amounts recoverable through depreciation. How far back can i amend my taxes Depletion takes place when you cut standing timber. How far back can i amend my taxes You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. How far back can i amend my taxes Figuring cost depletion. How far back can i amend my taxes   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. How far back can i amend my taxes Timber units. How far back can i amend my taxes   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. How far back can i amend my taxes You measure the timber using board feet, log scale, cords, or other units. How far back can i amend my taxes If you later determine that you have more or less units of timber, you must adjust the original estimate. How far back can i amend my taxes   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. How far back can i amend my taxes Depletion unit. How far back can i amend my taxes   You figure your depletion unit each year by taking the following steps. How far back can i amend my taxes Determine your cost or adjusted basis of the timber on hand at the beginning of the year. How far back can i amend my taxes Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. How far back can i amend my taxes Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. How far back can i amend my taxes Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. How far back can i amend my taxes Divide the result of (2) by the result of (3). How far back can i amend my taxes This is your depletion unit. How far back can i amend my taxes Example. How far back can i amend my taxes You bought a timber tract for $160,000 and the land was worth as much as the timber. How far back can i amend my taxes Your basis for the timber is $80,000. How far back can i amend my taxes Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). How far back can i amend my taxes If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). How far back can i amend my taxes When to claim depletion. How far back can i amend my taxes   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). How far back can i amend my taxes Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. How far back can i amend my taxes The inventory is your basis for determining gain or loss in the tax year you sell the timber products. How far back can i amend my taxes Example. How far back can i amend my taxes The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. How far back can i amend my taxes You would deduct $20,000 of the $40,000 depletion that year. How far back can i amend my taxes You would add the remaining $20,000 depletion to your closing inventory of timber products. How far back can i amend my taxes Electing to treat the cutting of timber as a sale or exchange. How far back can i amend my taxes   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. How far back can i amend my taxes You must make the election on your income tax return for the tax year to which it applies. How far back can i amend my taxes If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. How far back can i amend my taxes You generally report the gain as long-term capital gain. How far back can i amend my taxes The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. How far back can i amend my taxes For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. How far back can i amend my taxes   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. How far back can i amend my taxes The prior election (and revocation) is disregarded for purposes of making a subsequent election. How far back can i amend my taxes See Form T (Timber), Forest Activities Schedule, for more information. How far back can i amend my taxes Form T. How far back can i amend my taxes   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. 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