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Hr Block Free Tax Filing

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Hr Block Free Tax Filing

Hr block free tax filing Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. Hr block free tax filing Proc. Hr block free tax filing 2009-37 Table of Contents SECTION 1. Hr block free tax filing PURPOSE SECTION 2. Hr block free tax filing BACKGROUND SECTION 3. Hr block free tax filing SCOPE SECTION 4. Hr block free tax filing ELECTION PROCEDURES SECTION 5. Hr block free tax filing REQUIRED INFORMATION STATEMENT SECTION 6. Hr block free tax filing EFFECTIVE DATE SECTION 7. Hr block free tax filing TRANSITION RULE SECTION 8. Hr block free tax filing PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. Hr block free tax filing PURPOSE . Hr block free tax filing 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. Hr block free tax filing . Hr block free tax filing 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. Hr block free tax filing This revenue procedure describes the time and manner of providing this additional information. Hr block free tax filing . Hr block free tax filing 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. Hr block free tax filing Taxpayers should be aware that these regulations may be retroactive. Hr block free tax filing See § 7805(b)(2). Hr block free tax filing This revenue procedure may be modified to provide procedures consistent with additional guidance. Hr block free tax filing SECTION 2. Hr block free tax filing BACKGROUND . Hr block free tax filing 01 Section 108(i), Generally. Hr block free tax filing Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. Hr block free tax filing L. Hr block free tax filing No. Hr block free tax filing 111-5, 123 Stat. Hr block free tax filing 338. Hr block free tax filing In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. Hr block free tax filing Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). Hr block free tax filing The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. Hr block free tax filing 1273-1(d) of the Income Tax Regulations. Hr block free tax filing The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. Hr block free tax filing For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). Hr block free tax filing A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). Hr block free tax filing See § 108(i)(5)(D). Hr block free tax filing The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. Hr block free tax filing Section 108(i)(5)(D)(ii). Hr block free tax filing For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. Hr block free tax filing . Hr block free tax filing 02 Applicable Debt Instrument. Hr block free tax filing Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. Hr block free tax filing The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). Hr block free tax filing Section 108(i)(3)(B). Hr block free tax filing For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. Hr block free tax filing 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. Hr block free tax filing 1502-13(g)(5). Hr block free tax filing . Hr block free tax filing 03 Reacquisition. Hr block free tax filing Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). Hr block free tax filing The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. Hr block free tax filing See § 108(i)(4)(B). Hr block free tax filing The term “acquisition” also includes an indirect acquisition within the meaning of § 1. Hr block free tax filing 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). Hr block free tax filing For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. Hr block free tax filing . Hr block free tax filing 04 General Requirements for the Section 108(i) Election. Hr block free tax filing Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. Hr block free tax filing (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. Hr block free tax filing ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. Hr block free tax filing Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. Hr block free tax filing . Hr block free tax filing 05 Section 108(i) Elections Made by Pass-through Entities. Hr block free tax filing In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. Hr block free tax filing Section 108(i)(5)(B)(iii). Hr block free tax filing . Hr block free tax filing 06 Additional Information on Subsequent Years’ Returns. Hr block free tax filing Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. Hr block free tax filing . Hr block free tax filing 07 Exclusivity. Hr block free tax filing Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). Hr block free tax filing . Hr block free tax filing 08 Allocation of Deferred COD Income on Partnership Indebtedness. Hr block free tax filing Section 4. Hr block free tax filing 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. Hr block free tax filing If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Hr block free tax filing 704-1(b)(2)(iii). Hr block free tax filing Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). Hr block free tax filing The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). Hr block free tax filing The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). Hr block free tax filing . Hr block free tax filing 09 Partner’s Deferred § 752 Amount. Hr block free tax filing A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). Hr block free tax filing A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). Hr block free tax filing To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. Hr block free tax filing 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). Hr block free tax filing See Rev. Hr block free tax filing Rul. Hr block free tax filing 92-97, 1992-2 C. Hr block free tax filing B. Hr block free tax filing 124, and Rev. Hr block free tax filing Rul. Hr block free tax filing 94-4, 1994-1 C. Hr block free tax filing B. Hr block free tax filing 195. Hr block free tax filing A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). Hr block free tax filing . Hr block free tax filing 10 Allocation of Deferred COD Income on S Corporation Indebtedness. Hr block free tax filing For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. Hr block free tax filing . Hr block free tax filing 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. Hr block free tax filing (1) In general. Hr block free tax filing The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). Hr block free tax filing These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. Hr block free tax filing OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). Hr block free tax filing COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. Hr block free tax filing See § 1. Hr block free tax filing 56(g)-1(c)(1). Hr block free tax filing (2) Exceptions for certain special status corporations. Hr block free tax filing The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. Hr block free tax filing OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. Hr block free tax filing . Hr block free tax filing 12 Extension of Time to Make Election. Hr block free tax filing Under § 301. Hr block free tax filing 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. Hr block free tax filing An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. Hr block free tax filing Section 301. Hr block free tax filing 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. Hr block free tax filing SECTION 3. Hr block free tax filing SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). Hr block free tax filing SECTION 4. Hr block free tax filing ELECTION PROCEDURES . Hr block free tax filing 01 In General. Hr block free tax filing (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. Hr block free tax filing 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. Hr block free tax filing 07, 4. Hr block free tax filing 08, 4. Hr block free tax filing 09, or 4. Hr block free tax filing 10 of this revenue procedure. Hr block free tax filing (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. Hr block free tax filing 01(1)(a) of this revenue procedure for making the § 108(i) election. Hr block free tax filing The rules that apply to an automatic extension under § 301. Hr block free tax filing 9100-2(a) apply to this automatic extension. Hr block free tax filing . Hr block free tax filing 02 Section 108(i) Elections Made by Members of Consolidated Groups. Hr block free tax filing The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. Hr block free tax filing See § 1. Hr block free tax filing 1502-77(a). Hr block free tax filing . Hr block free tax filing 03 Aggregation Rule. Hr block free tax filing A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. Hr block free tax filing A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. Hr block free tax filing 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. Hr block free tax filing . Hr block free tax filing 04 Partial Elections. Hr block free tax filing (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. Hr block free tax filing Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. Hr block free tax filing The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. Hr block free tax filing (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). Hr block free tax filing Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. Hr block free tax filing (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Hr block free tax filing Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). Hr block free tax filing A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. Hr block free tax filing The provisions of this section 4. Hr block free tax filing 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. Hr block free tax filing . Hr block free tax filing 05 Contents of Election Statement. Hr block free tax filing A statement meets the requirements of this section 4. Hr block free tax filing 05 if the statement— (1) Label. Hr block free tax filing States “Section 108(i) Election” across the top. Hr block free tax filing (2) Required information. Hr block free tax filing Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. Hr block free tax filing 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. Hr block free tax filing . Hr block free tax filing 06 Supplemental information. Hr block free tax filing The statement described in section 4. Hr block free tax filing 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. Hr block free tax filing 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. Hr block free tax filing 05(2)(d) of this revenue procedure. Hr block free tax filing This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. Hr block free tax filing If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. Hr block free tax filing If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. Hr block free tax filing In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. Hr block free tax filing 08, 2. Hr block free tax filing 10 and, if applicable, 4. Hr block free tax filing 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. Hr block free tax filing . Hr block free tax filing 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. Hr block free tax filing The rules of this section 4. Hr block free tax filing 07 apply to partnerships other than partnerships described in section 4. Hr block free tax filing 10 of this revenue procedure. Hr block free tax filing (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). Hr block free tax filing For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. Hr block free tax filing , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Hr block free tax filing Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). Hr block free tax filing (2) Election information statement provided to partners. Hr block free tax filing The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. Hr block free tax filing 07(2). Hr block free tax filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Hr block free tax filing A statement meets the requirements of this section 4. Hr block free tax filing 07(2) if the statement— (a) Label. Hr block free tax filing States “Section 108(i) Election Information Statement for Partners” across the top. Hr block free tax filing (b) Required information. Hr block free tax filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. Hr block free tax filing 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. Hr block free tax filing 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. Hr block free tax filing 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. Hr block free tax filing (c) If a partner fails to provide the written statement required by section 4. Hr block free tax filing 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. Hr block free tax filing 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. Hr block free tax filing (3) Partner reporting requirements. Hr block free tax filing The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. Hr block free tax filing 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. Hr block free tax filing Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. Hr block free tax filing A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. Hr block free tax filing If a partner provides its written statement under this section 4. Hr block free tax filing 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. Hr block free tax filing 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. Hr block free tax filing . Hr block free tax filing 08 Additional Requirements for an S Corporation Making a § 108(i) Election. Hr block free tax filing (1) Information filing on Schedule K-1 (Form 1120S). Hr block free tax filing For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. Hr block free tax filing , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. Hr block free tax filing S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. Hr block free tax filing (2) Election information statement provided to shareholders. Hr block free tax filing The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. Hr block free tax filing 08(2). Hr block free tax filing The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Hr block free tax filing A statement meets the requirements of this section 4. Hr block free tax filing 08(2) if the statement— (a) Label. Hr block free tax filing States “Section 108(i) Election Information Statement for Shareholders” across the top. Hr block free tax filing (b) Required information. Hr block free tax filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. Hr block free tax filing 06 of this revenue procedure. Hr block free tax filing . Hr block free tax filing 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. Hr block free tax filing The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. Hr block free tax filing 964-1(c)(3). Hr block free tax filing Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. Hr block free tax filing 05 of this revenue procedure and, if applicable, section 4. Hr block free tax filing 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. Hr block free tax filing . Hr block free tax filing 10 Section 108(i) Elections Made By Certain Foreign Partnerships. Hr block free tax filing The rules of this section 4. Hr block free tax filing 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). Hr block free tax filing See § 1. Hr block free tax filing 6031(a)-1(b). Hr block free tax filing (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. Hr block free tax filing 05 of this revenue procedure and, if applicable, section 4. Hr block free tax filing 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. Hr block free tax filing 6031(a)-1(b)(5) it files with the Service. Hr block free tax filing In addition, a nonfiling foreign partnership must include in the information required in section 4. Hr block free tax filing 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. Hr block free tax filing S. Hr block free tax filing persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). Hr block free tax filing (2) The nonfiling foreign partnership must make the election, in accordance with § 1. Hr block free tax filing 6031(a)-1(b)(5), by the date provided in section 4. Hr block free tax filing 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. Hr block free tax filing (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. Hr block free tax filing 07(1) of this revenue procedure. Hr block free tax filing Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Hr block free tax filing The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. Hr block free tax filing 07(2) of this revenue procedure by the date provided in section 4. Hr block free tax filing 01(1)(a) of this revenue procedure. Hr block free tax filing The partnership should not attach any statement described in section 4. Hr block free tax filing 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. Hr block free tax filing However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. Hr block free tax filing (4) The partnership and each affected partner must satisfy the requirements of section 4. Hr block free tax filing 07(3) of this revenue procedure. Hr block free tax filing . Hr block free tax filing 11 Protective § 108(i) Election. Hr block free tax filing (1) In general. Hr block free tax filing A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. Hr block free tax filing If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). Hr block free tax filing Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. Hr block free tax filing A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. Hr block free tax filing 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. Hr block free tax filing 01(1)(a) of this revenue procedure. Hr block free tax filing The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. Hr block free tax filing A statement meets the requirements of this section 4. Hr block free tax filing 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. Hr block free tax filing 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. Hr block free tax filing 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. Hr block free tax filing 06 of this revenue procedure. Hr block free tax filing (2) Statements provided to shareholders and partners. Hr block free tax filing (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. Hr block free tax filing 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. Hr block free tax filing 11(1)(d) of this revenue procedure. Hr block free tax filing (b) The partnership or S corporation should not attach the statements described in this section 4. Hr block free tax filing 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Hr block free tax filing . Hr block free tax filing 12 Election-Year Reporting by Tiered Pass-Through Entities. Hr block free tax filing (1) A partnership required to file a U. Hr block free tax filing S. Hr block free tax filing partnership return other than under § 1. Hr block free tax filing 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. Hr block free tax filing 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Hr block free tax filing 07(1)(a) through (d) of this revenue procedure). Hr block free tax filing (2) If a partnership described in section 4. Hr block free tax filing 12(1) of this revenue procedure receives a statement described in sections 4. Hr block free tax filing 07(2) or 4. Hr block free tax filing 10(3) of this revenue procedure or this section 4. Hr block free tax filing 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. Hr block free tax filing 07(2)(b)(x) of this revenue procedure. Hr block free tax filing If an S corporation receives a statement described in sections 4. Hr block free tax filing 07(2) or 4. Hr block free tax filing 10(3) of this revenue procedure or this section 4. Hr block free tax filing 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. Hr block free tax filing 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. Hr block free tax filing The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Hr block free tax filing The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Hr block free tax filing (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. Hr block free tax filing 704-1(b)(2)(iii). Hr block free tax filing The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. Hr block free tax filing No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. Hr block free tax filing The partnership allocates amounts described in section 4. Hr block free tax filing 06 of this revenue procedure under this section 4. Hr block free tax filing 12(3) as if the additional COD income was realized. Hr block free tax filing (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. Hr block free tax filing No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. Hr block free tax filing (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. Hr block free tax filing (6) This paragraph 4. Hr block free tax filing 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. Hr block free tax filing S. Hr block free tax filing Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. Hr block free tax filing 07(1) of this revenue procedure, or a statement described in sections 4. Hr block free tax filing 07(2) or 4. Hr block free tax filing 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Hr block free tax filing (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Hr block free tax filing 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. Hr block free tax filing 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Hr block free tax filing (b) A Category 2 filer must include its share of the information described in section 4. Hr block free tax filing 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Hr block free tax filing Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Hr block free tax filing (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. Hr block free tax filing 12(6)(a)(ii) and 4. Hr block free tax filing 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Hr block free tax filing However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Hr block free tax filing (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. Hr block free tax filing 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. Hr block free tax filing 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. Hr block free tax filing 12(1) and (2) of this revenue procedure. Hr block free tax filing Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Hr block free tax filing 12(6) of this revenue procedure. Hr block free tax filing (8) The provisions of section 4. Hr block free tax filing 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. Hr block free tax filing 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. Hr block free tax filing 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. Hr block free tax filing 11(1)(d) of this revenue procedure. Hr block free tax filing SECTION 5. Hr block free tax filing REQUIRED INFORMATION STATEMENT . Hr block free tax filing 01 Annual Information Statements. Hr block free tax filing Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. Hr block free tax filing 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. Hr block free tax filing 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. Hr block free tax filing . Hr block free tax filing 02 Contents of Statement. Hr block free tax filing A statement meets the requirements of this section 5. Hr block free tax filing 02 if the statement— (1) Label. Hr block free tax filing States “Section 108(i) Information Statement” across the top; (2) Required information. Hr block free tax filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Hr block free tax filing (3) Election attached. Hr block free tax filing Includes a copy of the election statement described in section 4. Hr block free tax filing 05 of this revenue procedure. Hr block free tax filing . Hr block free tax filing 03 Additional Annual Reporting Requirements for Certain Partnerships. Hr block free tax filing The rules of this section 5. Hr block free tax filing 03 apply to partnerships other than partnerships described in section 5. Hr block free tax filing 05 of this revenue procedure. Hr block free tax filing (1) In general. Hr block free tax filing A partnership that makes an election under § 108(i) (except for a protective election under section 4. Hr block free tax filing 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Hr block free tax filing 01 of this revenue procedure. Hr block free tax filing In addition, for each taxable year in which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. Hr block free tax filing 07(1) of this revenue procedure. Hr block free tax filing (2) Annual information statements provided to partners. Hr block free tax filing The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure, a statement meeting the requirements of this section 5. Hr block free tax filing 03(2). Hr block free tax filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. Hr block free tax filing A statement meets the requirements of this section 5. Hr block free tax filing 03(2) if the statement— (a) Label. Hr block free tax filing States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. Hr block free tax filing (b) Required information. Hr block free tax filing Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. Hr block free tax filing If a partner fails to provide the written statement required by section 4. Hr block free tax filing 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. Hr block free tax filing 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. Hr block free tax filing . Hr block free tax filing 04 Additional Annual Reporting Requirements for an S Corporation. Hr block free tax filing (1) In general. Hr block free tax filing An S corporation that makes an election under § 108(i) (except for a protective election under section 4. Hr block free tax filing 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. Hr block free tax filing 01 of this revenue procedure. Hr block free tax filing In addition, for each taxable year in which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. Hr block free tax filing 08(1) of this revenue procedure. Hr block free tax filing (2) Annual information statements provided to shareholders. Hr block free tax filing The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure a statement meeting the requirements of this section 5. Hr block free tax filing 04(2). Hr block free tax filing The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. Hr block free tax filing A statement meets the requirements of this section 5. Hr block free tax filing 04(2) if the statement— (a) Label. Hr block free tax filing States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. Hr block free tax filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. Hr block free tax filing . Hr block free tax filing 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. Hr block free tax filing (1) The rules of this section 5. Hr block free tax filing 05 apply to nonfiling foreign partnerships. Hr block free tax filing (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. Hr block free tax filing 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. Hr block free tax filing 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. Hr block free tax filing 01 of this revenue procedure. Hr block free tax filing (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. Hr block free tax filing 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. Hr block free tax filing (4) For each taxable year in which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. Hr block free tax filing 07(1) of this revenue procedure. Hr block free tax filing Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). Hr block free tax filing The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. Hr block free tax filing 6031(b)-1T(b). Hr block free tax filing The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. Hr block free tax filing 05(2) of this revenue procedure. Hr block free tax filing (5) For each taxable year for which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. Hr block free tax filing 03(2) of this revenue procedure. Hr block free tax filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. Hr block free tax filing . Hr block free tax filing 06 Information Statements Made on Behalf of Certain Foreign Corporations. Hr block free tax filing Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. Hr block free tax filing 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. Hr block free tax filing 01 of this revenue procedure. Hr block free tax filing . Hr block free tax filing 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. Hr block free tax filing (1) A partnership required to file a U. Hr block free tax filing S. Hr block free tax filing partnership return other than under § 1. Hr block free tax filing 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. Hr block free tax filing 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. Hr block free tax filing 07(1)(a) through (d) of this revenue procedure). Hr block free tax filing (2) If a partnership described in section 5. Hr block free tax filing 07(1) of this revenue procedure receives a statement described in sections 5. Hr block free tax filing 03(2) or 5. Hr block free tax filing 05(5) of this revenue procedure or this section 5. Hr block free tax filing 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. Hr block free tax filing If an S corporation receives a statement described in sections 5. Hr block free tax filing 03(2) or 5. Hr block free tax filing 05(5) of this revenue procedure or this section 5. Hr block free tax filing 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. Hr block free tax filing 03(2)(b)(i) through (viii) of this revenue procedure. Hr block free tax filing The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. Hr block free tax filing The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. Hr block free tax filing (3) This paragraph 5. Hr block free tax filing 07(3) provides the rules for persons described in section 4. Hr block free tax filing 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. Hr block free tax filing 03(1) of this revenue procedure, or a statement described in sections 5. Hr block free tax filing 03(2) or 5. Hr block free tax filing 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). Hr block free tax filing (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. Hr block free tax filing 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. Hr block free tax filing 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. Hr block free tax filing (b) A Category 2 filer must include its share of the information described in section 4. Hr block free tax filing 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. Hr block free tax filing Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. Hr block free tax filing (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. Hr block free tax filing 07(3)(a)(ii) and 5. Hr block free tax filing 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. Hr block free tax filing However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. Hr block free tax filing (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. Hr block free tax filing 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. Hr block free tax filing 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. Hr block free tax filing 07(1) and (2) of this revenue procedure. Hr block free tax filing Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. Hr block free tax filing 12(6) of this revenue procedure. Hr block free tax filing SECTION 6. Hr block free tax filing EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. Hr block free tax filing SECTION 7. Hr block free tax filing TRANSITION RULE . Hr block free tax filing 01 Noncomplying Election. Hr block free tax filing Except as otherwise provided in this section 7. Hr block free tax filing 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. Hr block free tax filing However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. Hr block free tax filing . Hr block free tax filing 02 Modification of Election. Hr block free tax filing A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). Hr block free tax filing To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. Hr block free tax filing . Hr block free tax filing 03 Notations. Hr block free tax filing A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. Hr block free tax filing A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. Hr block free tax filing See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. Hr block free tax filing SECTION 8. Hr block free tax filing PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. Hr block free tax filing S. Hr block free tax filing C. Hr block free tax filing 3507) under control number 1545-2147. Hr block free tax filing An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Hr block free tax filing The collection of information in this revenue procedure is in sections 4, 5 and 7. Hr block free tax filing This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. Hr block free tax filing This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. Hr block free tax filing The collection of information is required to obtain a benefit. Hr block free tax filing The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. Hr block free tax filing The estimated total annual reporting burden is 300,000 hours. Hr block free tax filing The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. Hr block free tax filing The estimated number of respondents is 50,000. Hr block free tax filing Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Hr block free tax filing Generally, tax returns and return information are confidential, as required by § 6103. Hr block free tax filing DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. Hr block free tax filing Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). Hr block free tax filing For further information regarding this revenue procedure, contact Megan A. Hr block free tax filing Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. Hr block free tax filing Blanchard at (202) 622-3950 for questions involving OID, Ronald M. Hr block free tax filing Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). Hr block free tax filing Prev  Up  Next   Home   More Internal Revenue Bulletins
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These tables below were originally published in the IRS Data Book, which is IRS Publication 55B, and are complied by various divisions throughout the IRS. The IRS's fiscal year runs from October 1 to September 30.


Enforcing Laws

Examination Coverage

Examination Coverage: Recommended and Average Recommended Additional Tax After Examination
by Type and Size of Return and Fiscal Year

Returns Examined by Type of Return and Internal Revenue Region, District, and Service Center and Fiscal Year
1999     1998     1997      1996     1995

•  Additional Tax and Penalties Recommended After Examination
By Tax Class and by Internal Revenue Regions, Districts and Service Centers and Fiscal Year
1997     1996     1995

Examination Coverage: Individual Income Tax Returns Examined
by Size of Adjusted Gross Income and Fiscal Year

Returns Examined with Unagreed Recommended Additional Tax After Examination
by Type and Size of Return and Fiscal Year

Returns Examined Involving Protection of the Revenue Base
by Type and Size of Return and Fiscal Year

Examination Coverage: Returns Examined Resulting in Refunds
by Type and Size of Return and Fiscal Year


Returns of Tax-Exempt Organizations, Employee Plans, and Government Entities Examined
by Type of Return and Fiscal Year

•  Returns of Tax-Exempt Organizations and Employee Plans Examined, and Recommended Additional Tax After Examinatinon
by Type of Examination and Fiscal Year
2005     2004     2003     2002     2001     2000     1999     1998

• Returns of Tax-Exempt Organizations, Employee Plans, and Tax-Exempt Bonds Examined
by Type of Examination and Fiscal Year
2005     2004     2003     2002     2001     2000     1999     1998

Determination Letters Issued on Employee Pension Plans
by Type and Disposition of the Plan and Fiscal Year

Tax-Exempt Guidance and Other Regulatory Activities

Applications for Tax-Exempt Status
by Organization Type and Internal Revenue Code Section and Fiscal Year

Tax-Exempt Organizations and Non-Exempt Charitable Trusts


Delinquent Collection Activities


Criminal Investigation Program
by Status or Disposition and Fiscal Year


Civil Penalties Assessed and Abated
by Type of Tax and Penalty and Fiscal Year


Information Reporting Program
In addition to receiving taxpayers' self-reported income and tax on those tax returns that are filed, the IRS receives independent information about income received and taxes withheld on information returns, such as Forms W-2 and 1099 from employers and other third parties. With its Automated Underreporter Program, the IRS matches these information returns to tax returns and contacts taxpayer to resolve discripancies. 
By Returns Received, Contacts, and Additional Tax and Interest Assessed


Math Errors on Individual Income Tax Returns
During the routine processing of tax returns, the IRS checks for mathematical and clerical errors before refunds are paid,
By type of error




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Assisting Taxpayers  |  Managing the System

IRS Tax Compliance Activities  |  Taxpayer Compliance Research

 

 

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The Hr Block Free Tax Filing

Hr block free tax filing 3. Hr block free tax filing   Personal Exemptions and Dependents Table of Contents What's New Introduction Useful Items - You may want to see: ExemptionsPersonal Exemptions Exemptions for Dependents Qualifying Child Qualifying Relative Phaseout of Exemptions Social Security Numbers for DependentsBorn and died in 2013. Hr block free tax filing Taxpayer identification numbers for aliens. Hr block free tax filing Taxpayer identification numbers for adoptees. Hr block free tax filing What's New Exemption amount. Hr block free tax filing  The amount you can deduct for each exemption has increased. Hr block free tax filing It was $3,800 for 2012. Hr block free tax filing It is $3,900 for 2013. Hr block free tax filing Exemption phaseout. Hr block free tax filing  You lose at least part of the benefit of your exemptions if your adjusted gross income is more than a certain amount. Hr block free tax filing For 2013, this amount is $150,000 for a married individual filing a separate return; $250,000 for a single individual; $275,000 for a head of household; and $300,000 for married individuals filing jointly or a qualifying widow(er). Hr block free tax filing See Phaseout of Exemptions , later. Hr block free tax filing Introduction This chapter discusses the following topics. Hr block free tax filing Personal exemptions — You generally can take one for yourself and, if you are married, one for your spouse. Hr block free tax filing Exemptions for dependents — You generally can take an exemption for each of your dependents. Hr block free tax filing A dependent is your qualifying child or qualifying relative. Hr block free tax filing If you are entitled to claim an exemption for a dependent, that dependent cannot claim a personal exemption on his or her own tax return. Hr block free tax filing Phaseout of exemptions — Your deduction is reduced if your adjusted gross income is more than a certain amount. Hr block free tax filing Social security number (SSN) requirement for dependents — You must list the SSN of any dependent for whom you claim an exemption. Hr block free tax filing Deduction. Hr block free tax filing   Exemptions reduce your taxable income. Hr block free tax filing You can deduct $3,900 for each exemption you claim in 2013. Hr block free tax filing But you may lose at least part of the dollar amount of your exemptions if your adjusted gross income is more than a certain amount. Hr block free tax filing See Phaseout of Exemptions , later. Hr block free tax filing How to claim exemptions. Hr block free tax filing    How you claim an exemption on your tax return depends on which form you file. Hr block free tax filing    If you file Form 1040EZ, the exemption amount is combined with the standard deduction amount and entered on line 5. Hr block free tax filing    If you file Form 1040A, complete lines 6a through 6d. Hr block free tax filing The total number of exemptions you can claim is the total in the box on line 6d. Hr block free tax filing Also complete line 26. Hr block free tax filing   If you file Form 1040, complete lines 6a through 6d. Hr block free tax filing The total number of exemptions you can claim is the total in the box on line 6d. Hr block free tax filing Also complete line 42. Hr block free tax filing Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information Form (and Instructions) 2120 Multiple Support Declaration 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent Exemptions There are two types of exemptions you may be able to take: Personal exemptions for yourself and your spouse, and Exemptions for dependents (dependency exemptions). Hr block free tax filing While each is worth the same amount ($3,900 for 2013), different rules apply to each type. Hr block free tax filing Personal Exemptions You are generally allowed one exemption for yourself. Hr block free tax filing If you are married, you may be allowed one exemption for your spouse. Hr block free tax filing These are called personal exemptions. Hr block free tax filing Your Own Exemption You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. Hr block free tax filing If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent. Hr block free tax filing Your Spouse's Exemption Your spouse is never considered your dependent. Hr block free tax filing Joint return. Hr block free tax filing   On a joint return you can claim one exemption for yourself and one for your spouse. Hr block free tax filing Separate return. Hr block free tax filing   If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. Hr block free tax filing This is true even if the other taxpayer does not actually claim your spouse as a dependent. Hr block free tax filing You can claim an exemption for your spouse even if he or she is a nonresident alien; in that case, your spouse must have no gross income for U. Hr block free tax filing S. Hr block free tax filing tax purposes, must not be filing a return, and must not be the dependent of another taxpayer. Hr block free tax filing Death of spouse. Hr block free tax filing   If your spouse died during the year and you file a joint return for yourself and your deceased spouse, you generally can claim your spouse's exemption under the rules just explained in Joint return . Hr block free tax filing If you file a separate return for the year, you may be able to claim your spouse's exemption under the rules just described in Separate return . Hr block free tax filing   If you remarried during the year, you cannot take an exemption for your deceased spouse. Hr block free tax filing   If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. Hr block free tax filing If you file a joint return with your new spouse, you can be claimed as an exemption only on that return. Hr block free tax filing Divorced or separated spouse. Hr block free tax filing   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. Hr block free tax filing This rule applies even if you provided all of your former spouse's support. Hr block free tax filing Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. Hr block free tax filing You can claim an exemption for a dependent even if your dependent files a return. Hr block free tax filing The term “dependent” means: A qualifying child, or A qualifying relative. Hr block free tax filing The terms “ qualifying child ” and “ qualifying relative ” are defined later. Hr block free tax filing You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met. Hr block free tax filing Dependent taxpayer test. Hr block free tax filing Joint return test. Hr block free tax filing Citizen or resident test. Hr block free tax filing These three tests are explained in detail later. Hr block free tax filing All the requirements for claiming an exemption for a dependent are summarized in Table 3-1. Hr block free tax filing Table 3-1. Hr block free tax filing Overview of the Rules for Claiming an Exemption for a Dependent Caution. Hr block free tax filing This table is only an overview of the rules. Hr block free tax filing For details, see the rest of this chapter. Hr block free tax filing You cannot claim any dependents if you (or your spouse, if filing jointly) could be claimed as a dependent by another taxpayer. Hr block free tax filing   You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid. Hr block free tax filing   You cannot claim a person as a dependent unless that person is a U. Hr block free tax filing S. Hr block free tax filing citizen, U. Hr block free tax filing S. Hr block free tax filing resident alien, U. Hr block free tax filing S. Hr block free tax filing national, or a resident of Canada or Mexico. Hr block free tax filing 1  You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Hr block free tax filing   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Hr block free tax filing   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled. Hr block free tax filing   The child must have lived with you for more than half of the year. Hr block free tax filing 2  The child must not have provided more than half of his or her own support for the year. Hr block free tax filing   The child is not filing a joint return for the year (unless that return is filed only to get a refund of income tax withheld or estimated tax paid). Hr block free tax filing  If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. Hr block free tax filing See the Special Rule for Qualifying Child of More Than One Person to find out which person is the person entitled to claim the child as a qualifying child. Hr block free tax filing   The person cannot be your qualifying child or the qualifying child of any other taxpayer. Hr block free tax filing   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you , or (b) must live with you all year as a member of your household2 (and your relationship must not violate local law). Hr block free tax filing   The person's gross income for the year must be less than $3,900. Hr block free tax filing 3  You must provide more than half of the person's total support for the year. Hr block free tax filing 4  1There is an exception for certain adopted children. Hr block free tax filing 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. Hr block free tax filing 3There is an exception if the person is disabled and has income from a sheltered workshop. Hr block free tax filing 4There are exceptions for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. Hr block free tax filing Dependent not allowed a personal exemption. Hr block free tax filing If you can claim an exemption for your dependent, the dependent cannot claim his or her own personal exemption on his or her own tax return. Hr block free tax filing This is true even if you do not claim the dependent's exemption on your return. Hr block free tax filing It is also true if the dependent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. Hr block free tax filing Housekeepers, maids, or servants. Hr block free tax filing   If these people work for you, you cannot claim exemptions for them. Hr block free tax filing Child tax credit. Hr block free tax filing   You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. Hr block free tax filing For more information, see chapter 34. Hr block free tax filing Dependent Taxpayer Test If you can be claimed as a dependent by another person, you cannot claim anyone else as a dependent. Hr block free tax filing Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent. Hr block free tax filing If you are filing a joint return and your spouse can be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return. Hr block free tax filing Joint Return Test You generally cannot claim a married person as a dependent if he or she files a joint return. Hr block free tax filing Exception. Hr block free tax filing   You can claim an exemption for a person who files a joint return if that person and his or her spouse file the joint return only to claim a refund of income tax withheld or estimated tax paid. Hr block free tax filing Example 1—child files joint return. Hr block free tax filing You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Hr block free tax filing He earned $25,000 for the year. Hr block free tax filing The couple files a joint return. Hr block free tax filing You cannot take an exemption for your daughter. Hr block free tax filing Example 2—child files joint return only as claim for refund of withheld tax. Hr block free tax filing Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Hr block free tax filing Neither is required to file a tax return. Hr block free tax filing They do not have a child. Hr block free tax filing Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. Hr block free tax filing The exception to the joint return test applies, so you are not disqualified from claiming an exemption for each of them just because they file a joint return. Hr block free tax filing You can claim exemptions for each of them if all the other tests to do so are met. Hr block free tax filing Example 3—child files joint return to claim American opportunity credit. Hr block free tax filing The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Hr block free tax filing He and his wife are not required to file a tax return. Hr block free tax filing However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Hr block free tax filing Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. Hr block free tax filing The exception to the joint return test does not apply, so you cannot claim an exemption for either of them. Hr block free tax filing Citizen or Resident Test You cannot claim a person as a dependent unless that person is a U. Hr block free tax filing S. Hr block free tax filing citizen, U. Hr block free tax filing S. Hr block free tax filing resident alien, U. Hr block free tax filing S. Hr block free tax filing national, or a resident of Canada or Mexico. Hr block free tax filing However, there is an exception for certain adopted children, as explained next. Hr block free tax filing Exception for adopted child. Hr block free tax filing   If you are a U. Hr block free tax filing S. Hr block free tax filing citizen or U. Hr block free tax filing S. Hr block free tax filing national who has legally adopted a child who is not a U. Hr block free tax filing S. Hr block free tax filing citizen, U. Hr block free tax filing S. Hr block free tax filing resident alien, or U. Hr block free tax filing S. Hr block free tax filing national, this test is met if the child lived with you as a member of your household all year. Hr block free tax filing This exception also applies if the child was lawfully placed with you for legal adoption. Hr block free tax filing Child's place of residence. Hr block free tax filing   Children usually are citizens or residents of the country of their parents. Hr block free tax filing   If you were a U. Hr block free tax filing S. Hr block free tax filing citizen when your child was born, the child may be a U. Hr block free tax filing S. Hr block free tax filing citizen and meet this test even if the other parent was a nonresident alien and the child was born in a foreign country. Hr block free tax filing Foreign students' place of residence. Hr block free tax filing   Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U. Hr block free tax filing S. Hr block free tax filing residents and do not meet this test. Hr block free tax filing You cannot claim an exemption for them. Hr block free tax filing However, if you provided a home for a foreign student, you may be able to take a charitable contribution deduction. Hr block free tax filing See Expenses Paid for Student Living With You in chapter 24. Hr block free tax filing U. Hr block free tax filing S. Hr block free tax filing national. Hr block free tax filing   A U. Hr block free tax filing S. Hr block free tax filing national is an individual who, although not a U. Hr block free tax filing S. Hr block free tax filing citizen, owes his or her allegiance to the United States. Hr block free tax filing U. Hr block free tax filing S. Hr block free tax filing nationals include American Samoans and Northern Mariana Islanders who chose to become U. Hr block free tax filing S. Hr block free tax filing nationals instead of U. Hr block free tax filing S. Hr block free tax filing citizens. Hr block free tax filing Qualifying Child Five tests must be met for a child to be your qualifying child. Hr block free tax filing The five tests are: Relationship, Age, Residency, Support, and Joint return. Hr block free tax filing These tests are explained next. Hr block free tax filing If a child meets the five tests to be the qualifying child of more than one person, a special rule applies to determine which person can actually treat the child as a qualifying child. Hr block free tax filing See Special Rule for Qualifying Child of More Than One Person, later. Hr block free tax filing Relationship Test To meet this test, a child must be: Your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild) of any of them, or Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them. Hr block free tax filing Adopted child. Hr block free tax filing   An adopted child is always treated as your own child. Hr block free tax filing The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Hr block free tax filing Foster child. Hr block free tax filing   A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Hr block free tax filing Age Test To meet this test, a child must be: Under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), A student under age 24 at the end of the year and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during the year, regardless of age. Hr block free tax filing Example. Hr block free tax filing Your son turned 19 on December 10. Hr block free tax filing Unless he was permanently and totally disabled or a student, he does not meet the age test because, at the end of the year, he was not under age 19. Hr block free tax filing Child must be younger than you or spouse. Hr block free tax filing   To be your qualifying child, a child who is not permanently and totally disabled must be younger than you. Hr block free tax filing However, if you are married filing jointly, the child must be younger than you or your spouse but does not have to be younger than both of you. Hr block free tax filing Example 1—child not younger than you or spouse. Hr block free tax filing Your 23-year-old brother, who is a student and unmarried, lives with you and your spouse. Hr block free tax filing He is not disabled. Hr block free tax filing Both you and your spouse are 21 years old, and you file a joint return. Hr block free tax filing Your brother is not your qualifying child because he is not younger than you or your spouse. Hr block free tax filing Example 2—child younger than your spouse but not younger than you. Hr block free tax filing The facts are the same as in Example 1 except your spouse is 25 years old. Hr block free tax filing Because your brother is younger than your spouse, and you and your spouse are filing a joint return, your brother is your qualifying child, even though he is not younger than you. Hr block free tax filing Student defined. Hr block free tax filing   To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year: A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency. Hr block free tax filing The 5 calendar months do not have to be consecutive. Hr block free tax filing Full-time student. Hr block free tax filing   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. Hr block free tax filing School defined. Hr block free tax filing   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. Hr block free tax filing However, an on-the-job training course, correspondence school, or school offering courses only through the Internet does not count as a school. Hr block free tax filing Vocational high school students. Hr block free tax filing   Students who work on “co-op” jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. Hr block free tax filing Permanently and totally disabled. Hr block free tax filing   Your child is permanently and totally disabled if both of the following apply. Hr block free tax filing He or she cannot engage in any substantial gainful activity because of a physical or mental condition. Hr block free tax filing A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. Hr block free tax filing Residency Test To meet this test, your child must have lived with you for more than half the year. Hr block free tax filing There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents. Hr block free tax filing Temporary absences. Hr block free tax filing   Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent due to special circumstances such as: Illness, Education, Business, Vacation, or Military service. Hr block free tax filing Your child is also considered to have lived with you during any required hospital stay following birth, as long as the child would have lived with you during that time but for the hospitalization. Hr block free tax filing Death or birth of child. Hr block free tax filing   A child who was born or died during the year is treated as having lived with you more than half of the year if your home was the child's home more than half of the time he or she was alive during the year. Hr block free tax filing Child born alive. Hr block free tax filing   You may be able to claim an exemption for a child born alive during the year, even if the child lived only for a moment. Hr block free tax filing State or local law must treat the child as having been born alive. Hr block free tax filing There must be proof of a live birth shown by an official document, such as a birth certificate. Hr block free tax filing The child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent must be met. Hr block free tax filing Stillborn child. Hr block free tax filing   You cannot claim an exemption for a stillborn child. Hr block free tax filing Kidnapped child. Hr block free tax filing   You may be able to treat your child as meeting the residency test even if the child has been kidnapped. Hr block free tax filing See Publication 501 for details. Hr block free tax filing Children of divorced or separated parents (or parents who live apart). Hr block free tax filing   In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. Hr block free tax filing However, the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true. Hr block free tax filing The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. Hr block free tax filing The child received over half of his or her support for the year from the parents. Hr block free tax filing The child is in the custody of one or both parents for more than half of the year. Hr block free tax filing Either of the following statements is true. Hr block free tax filing The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. Hr block free tax filing (If the decree or agreement went into effect after 1984 and before 2009, see Post-1984 and pre-2009 divorce decree or separation agreement , later. Hr block free tax filing If the decree or agreement went into effect after 2008, see Post-2008 divorce decree or separation agreement , later. Hr block free tax filing ) A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during the year. Hr block free tax filing Custodial parent and noncustodial parent. Hr block free tax filing   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Hr block free tax filing The other parent is the noncustodial parent. Hr block free tax filing   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. Hr block free tax filing   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). Hr block free tax filing Equal number of nights. Hr block free tax filing   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income (AGI). Hr block free tax filing December 31. Hr block free tax filing   The night of December 31 is treated as part of the year in which it begins. Hr block free tax filing For example, December 31, 2013, is treated as part of 2013. Hr block free tax filing Emancipated child. Hr block free tax filing   If a child is emancipated under state law, the child is treated as not living with either parent. Hr block free tax filing See Examples 5 and 6. Hr block free tax filing Absences. Hr block free tax filing   If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. Hr block free tax filing But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. Hr block free tax filing Parent works at night. Hr block free tax filing   If, due to a parent's nighttime work schedule, a child lives for a greater number of days, but not nights, with the parent who works at night, that parent is treated as the custodial parent. Hr block free tax filing On a school day, the child is treated as living at the primary residence registered with the school. Hr block free tax filing Example 1—child lived with one parent for a greater number of nights. Hr block free tax filing You and your child’s other parent are divorced. Hr block free tax filing In 2013, your child lived with you 210 nights and with the other parent 155 nights. Hr block free tax filing You are the custodial parent. Hr block free tax filing Example 2—child is away at camp. Hr block free tax filing In 2013, your daughter lives with each parent for alternate weeks. Hr block free tax filing In the summer, she spends 6 weeks at summer camp. Hr block free tax filing During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. Hr block free tax filing Example 3—child lived same number of nights with each parent. Hr block free tax filing Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. Hr block free tax filing Your AGI is $40,000. Hr block free tax filing Your ex-spouse's AGI is $25,000. Hr block free tax filing You are treated as your son's custodial parent because you have the higher AGI. Hr block free tax filing Example 4—child is at parent’s home but with other parent. Hr block free tax filing Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. Hr block free tax filing You become ill and are hospitalized. Hr block free tax filing The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. Hr block free tax filing Your son is treated as living with you during this 10-day period because he was living in your home. Hr block free tax filing Example 5—child emancipated in May. Hr block free tax filing When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. Hr block free tax filing As a result, he is not considered in the custody of his parents for more than half of the year. Hr block free tax filing The special rule for children of divorced or separated parents does not apply. Hr block free tax filing Example 6—child emancipated in August. Hr block free tax filing Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. Hr block free tax filing She turns 18 and is emancipated under state law on August 1, 2013. Hr block free tax filing Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. Hr block free tax filing You are the custodial parent. Hr block free tax filing Written declaration. Hr block free tax filing    The custodial parent may use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. Hr block free tax filing The noncustodial parent must attach a copy of the form or statement to his or her tax return. Hr block free tax filing   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. Hr block free tax filing Post-1984 and pre-2009 divorce decree or separation agreement. Hr block free tax filing   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Hr block free tax filing The decree or agreement must state all three of the following. Hr block free tax filing The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. Hr block free tax filing The custodial parent will not claim the child as a dependent for the year. Hr block free tax filing The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. Hr block free tax filing   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her tax return. Hr block free tax filing The cover page (write the other parent's social security number on this page). Hr block free tax filing The pages that include all of the information identified in items (1) through (3) above. Hr block free tax filing The signature page with the other parent's signature and the date of the agreement. Hr block free tax filing Post-2008 divorce decree or separation agreement. Hr block free tax filing   The noncustodial parent cannot attach pages from the decree or agreement instead of Form 8332 if the decree or agreement went into effect after 2008. Hr block free tax filing The custodial parent must sign either Form 8332 or a similar statement whose only purpose is to release the custodial parent's claim to an exemption for a child, and the noncustodial parent must attach a copy to his or her return. Hr block free tax filing The form or statement must release the custodial parent's claim to the child without any conditions. Hr block free tax filing For example, the release must not depend on the noncustodial parent paying support. Hr block free tax filing    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. Hr block free tax filing Revocation of release of claim to an exemption. Hr block free tax filing   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 (or a similar statement). Hr block free tax filing For the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. Hr block free tax filing The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. Hr block free tax filing Remarried parent. Hr block free tax filing   If you remarry, the support provided by your new spouse is treated as provided by you. Hr block free tax filing Parents who never married. Hr block free tax filing   This special rule for divorced or separated parents also applies to parents who never married, and who lived apart at all times during the last 6 months of the year. Hr block free tax filing Support Test (To Be a Qualifying Child) To meet this test, the child cannot have provided more than half of his or her own support for the year. Hr block free tax filing This test is different from the support test to be a qualifying relative, which is described later. Hr block free tax filing However, to see what is or is not support, see Support Test (To Be a Qualifying Relative) , later. Hr block free tax filing If you are not sure whether a child provided more than half of his or her own support, you may find Worksheet 3-1 helpful. Hr block free tax filing Worksheet 3-1. Hr block free tax filing Worksheet for Determining Support Funds Belonging to the Person You Supported       1. Hr block free tax filing Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year. Hr block free tax filing Do not include funds provided by the state; include those amounts on line 23 instead 1. Hr block free tax filing     2. Hr block free tax filing Enter the amount on line 1 that was used for the person's support 2. Hr block free tax filing     3. Hr block free tax filing Enter the amount on line 1 that was used for other purposes 3. Hr block free tax filing     4. Hr block free tax filing Enter the total amount in the person's savings and other accounts at the end of the year 4. Hr block free tax filing     5. Hr block free tax filing Add lines 2 through 4. Hr block free tax filing (This amount should equal line 1. Hr block free tax filing ) 5. Hr block free tax filing     Expenses for Entire Household (where the person you supported lived)       6. Hr block free tax filing Lodging (complete line 6a or 6b):         a. Hr block free tax filing Enter the total rent paid 6a. Hr block free tax filing       b. Hr block free tax filing Enter the fair rental value of the home. Hr block free tax filing If the person you supported owned the home,  also include this amount in line 21 6b. Hr block free tax filing     7. Hr block free tax filing Enter the total food expenses 7. Hr block free tax filing     8. Hr block free tax filing Enter the total amount of utilities (heat, light, water, etc. Hr block free tax filing not included in line 6a or 6b) 8. Hr block free tax filing     9. Hr block free tax filing Enter the total amount of repairs (not included in line 6a or 6b) 9. Hr block free tax filing     10. Hr block free tax filing Enter the total of other expenses. Hr block free tax filing Do not include expenses of maintaining the home, such as mortgage interest, real estate taxes, and insurance 10. Hr block free tax filing     11. Hr block free tax filing Add lines 6a through 10. Hr block free tax filing These are the total household expenses 11. Hr block free tax filing     12. Hr block free tax filing Enter total number of persons who lived in the household 12. Hr block free tax filing     Expenses for the Person You Supported       13. Hr block free tax filing Divide line 11 by line 12. Hr block free tax filing This is the person's share of the household expenses 13. Hr block free tax filing     14. Hr block free tax filing Enter the person's total clothing expenses 14. Hr block free tax filing     15. Hr block free tax filing Enter the person's total education expenses 15. Hr block free tax filing     16. Hr block free tax filing Enter the person's total medical and dental expenses not paid for or reimbursed by insurance 16. Hr block free tax filing     17. Hr block free tax filing Enter the person's total travel and recreation expenses 17. Hr block free tax filing     18. Hr block free tax filing Enter the total of the person's other expenses 18. Hr block free tax filing     19. Hr block free tax filing Add lines 13 through 18. Hr block free tax filing This is the total cost of the person's support for the year 19. Hr block free tax filing     Did the Person Provide More Than Half of His or Her Own Support?       20. Hr block free tax filing Multiply line 19 by 50% (. Hr block free tax filing 50) 20. Hr block free tax filing     21. Hr block free tax filing Enter the amount from line 2, plus the amount from line 6b if the person you supported owned  the home. Hr block free tax filing This is the amount the person provided for his or her own support 21. Hr block free tax filing     22. Hr block free tax filing Is line 21 more than line 20?   No. Hr block free tax filing You meet the support test for this person to be your qualifying child. Hr block free tax filing If this person also meets the other tests to be a qualifying child, stop here; do not complete lines 23–26. Hr block free tax filing Otherwise, go to line 23 and fill out the rest of the worksheet to determine if this person is your qualifying relative. Hr block free tax filing    Yes. Hr block free tax filing You do not meet the support test for this person to be either your qualifying child or your qualifying relative. Hr block free tax filing Stop here. Hr block free tax filing        Did You Provide More Than Half?       23. Hr block free tax filing Enter the amount others provided for the person's support. Hr block free tax filing Include amounts provided by state, local, and other welfare societies or agencies. Hr block free tax filing Do not include any amounts included on line 1 23. Hr block free tax filing     24. Hr block free tax filing Add lines 21 and 23 24. Hr block free tax filing     25. Hr block free tax filing Subtract line 24 from line 19. Hr block free tax filing This is the amount you provided for the person's support 25. Hr block free tax filing     26. Hr block free tax filing Is line 25 more than line 20?   Yes. Hr block free tax filing You meet the support test for this person to be your qualifying relative. Hr block free tax filing    No. Hr block free tax filing You do not meet the support test for this person to be your qualifying relative. Hr block free tax filing You cannot claim an exemption for this person unless you can do so under a multiple support agreement, the support test for children of divorced or separated parents, or the special rule for kidnapped children. Hr block free tax filing See Multiple Support Agreement or Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) , or Kidnapped child under Qualifying Relative. Hr block free tax filing   Example. Hr block free tax filing You provided $4,000 toward your 16-year-old son's support for the year. Hr block free tax filing He has a part-time job and provided $6,000 to his own support. Hr block free tax filing He provided more than half of his own support for the year. Hr block free tax filing He is not your qualifying child. Hr block free tax filing Foster care payments and expenses. Hr block free tax filing   Payments you receive for the support of a foster child from a child placement agency are considered support provided by the agency. Hr block free tax filing Similarly, payments you receive for the support of a foster child from a state or county are considered support provided by the state or county. Hr block free tax filing   If you are not in the trade or business of providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster child were mainly to benefit an organization qualified to receive deductible charitable contributions, the expenses are deductible as charitable contributions but are not considered support you provided. Hr block free tax filing For more information about the deduction for charitable contributions, see chapter 24. Hr block free tax filing If your unreimbursed expenses are not deductible as charitable contributions, they may qualify as support you provided. Hr block free tax filing   If you are in the trade or business of providing foster care, your unreimbursed expenses are not considered support provided by you. Hr block free tax filing Example 1. Hr block free tax filing Lauren, a foster child, lived with Mr. Hr block free tax filing and Mrs. Hr block free tax filing Smith for the last 3 months of the year. Hr block free tax filing The Smiths cared for Lauren because they wanted to adopt her (although she had not been placed with them for adoption). Hr block free tax filing They did not care for her as a trade or business or to benefit the agency that placed her in their home. Hr block free tax filing The Smiths' unreimbursed expenses are not deductible as charitable contributions but are considered support they provided for Lauren. Hr block free tax filing Example 2. Hr block free tax filing You provided $3,000 toward your 10-year-old foster child's support for the year. Hr block free tax filing The state government provided $4,000, which is considered support provided by the state, not by the child. Hr block free tax filing See Support provided by the state (welfare, food stamps, housing, etc. Hr block free tax filing ) , later. Hr block free tax filing Your foster child did not provide more than half of her own support for the year. Hr block free tax filing Scholarships. Hr block free tax filing   A scholarship received by a child who is a student is not taken into account in determining whether the child provided more than half of his or her own support. Hr block free tax filing Joint Return Test (To Be a Qualifying Child) To meet this test, the child cannot file a joint return for the year. Hr block free tax filing Exception. Hr block free tax filing   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. Hr block free tax filing Example 1—child files joint return. Hr block free tax filing You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Hr block free tax filing He earned $25,000 for the year. Hr block free tax filing The couple files a joint return. Hr block free tax filing Because your daughter and her husband file a joint return, she is not your qualifying child. Hr block free tax filing Example 2—child files joint return only as a claim for refund of withheld tax. Hr block free tax filing Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Hr block free tax filing Neither is required to file a tax return. Hr block free tax filing They do not have a child. Hr block free tax filing Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. Hr block free tax filing The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. Hr block free tax filing Example 3—child files joint return to claim American opportunity credit. Hr block free tax filing The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Hr block free tax filing He and his wife were not required to file a tax return. Hr block free tax filing However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Hr block free tax filing Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. Hr block free tax filing The exception to the joint return test does not apply, so your son is not your qualifying child. Hr block free tax filing Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. Hr block free tax filing This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. Hr block free tax filing If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents (or parents who live apart) described earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. Hr block free tax filing Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Hr block free tax filing Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Hr block free tax filing The exemption for the child. Hr block free tax filing The child tax credit. Hr block free tax filing Head of household filing status. Hr block free tax filing The credit for child and dependent care expenses. Hr block free tax filing The exclusion from income for dependent care benefits. Hr block free tax filing The earned income credit. Hr block free tax filing The other person cannot take any of these benefits based on this qualifying child. Hr block free tax filing In other words, you and the other person cannot agree to divide these benefits between you. Hr block free tax filing The other person cannot take any of these tax benefits for a child unless he or she has a different qualifying child. Hr block free tax filing Tiebreaker rules. Hr block free tax filing   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. Hr block free tax filing If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Hr block free tax filing If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. Hr block free tax filing If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Hr block free tax filing If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Hr block free tax filing If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Hr block free tax filing If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Hr block free tax filing If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' combined AGI equally between the parents. Hr block free tax filing See Example 6 . Hr block free tax filing   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Hr block free tax filing Example 1—child lived with parent and grandparent. Hr block free tax filing You and your 3-year-old daughter Jane lived with your mother all year. Hr block free tax filing You are 25 years old, unmarried, and your AGI is $9,000. Hr block free tax filing Your mother's AGI is $15,000. Hr block free tax filing Jane's father did not live with you or your daughter. Hr block free tax filing You have not signed Form 8332 (or a similar statement) to release the child's exemption to the noncustodial parent. Hr block free tax filing Jane is a qualifying child of both you and your mother because she meets the relationship, age, residency, support, and joint return tests for both you and your mother. Hr block free tax filing However, only one of you can claim her. Hr block free tax filing Jane is not a qualifying child of anyone else, including her father. Hr block free tax filing You agree to let your mother claim Jane. Hr block free tax filing This means your mother can claim Jane as a qualifying child for all of the six tax benefits listed earlier, if she qualifies (and if you do not claim Jane as a qualifying child for any of those tax benefits). Hr block free tax filing Example 2—parent has higher AGI than grandparent. Hr block free tax filing The facts are the same as in Example 1 except your AGI is $18,000. Hr block free tax filing Because your mother's AGI is not higher than yours, she cannot claim Jane. Hr block free tax filing Only you can claim Jane. Hr block free tax filing Example 3—two persons claim same child. Hr block free tax filing The facts are the same as in Example 1 except that you and your mother both claim Jane as a qualifying child. Hr block free tax filing In this case, you, as the child's parent, will be the only one allowed to claim Jane as a qualifying child. Hr block free tax filing The IRS will disallow your mother's claim to the six tax benefits listed earlier unless she has another qualifying child. Hr block free tax filing Example 4—qualifying children split between two persons. Hr block free tax filing The facts are the same as in Example 1 except you also have two other young children who are qualifying children of both you and your mother. Hr block free tax filing Only one of you can claim each child. Hr block free tax filing However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. Hr block free tax filing For example, if you claim one child, your mother can claim the other two. Hr block free tax filing Example 5—taxpayer who is a qualifying child. Hr block free tax filing The facts are the same as in Example 1 except you are only 18 years old and did not provide more than half of your own support for the year. Hr block free tax filing This means you are your mother's qualifying child. Hr block free tax filing If she can claim you as a dependent, then you cannot claim your daughter as a dependent because of the Dependent Taxpayer Test explained earlier. Hr block free tax filing Example 6—child lived with both parents and grandparent. Hr block free tax filing The facts are the same as in Example 1 except you are married to your daughter's father. Hr block free tax filing The two of you live together with your daughter and your mother, and have an AGI of $20,000 on a joint return. Hr block free tax filing If you and your husband do not claim your daughter as a qualifying child, your mother can claim her instead. Hr block free tax filing Even though the AGI on your joint return, $20,000, is more than your mother's AGI of $15,000, for this purpose each parent's AGI can be treated as $10,000, so your mother's $15,000 AGI is treated as higher than the highest AGI of any of the child's parents who can claim the child. Hr block free tax filing Example 7—separated parents. Hr block free tax filing You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. Hr block free tax filing In August and September, your son lived with you. Hr block free tax filing For the rest of the year, your son lived with your husband, the boy's father. Hr block free tax filing Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. Hr block free tax filing At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the rule for children of divorced or separated parents (or parents who live apart) does not apply. Hr block free tax filing You and your husband will file separate returns. Hr block free tax filing Your husband agrees to let you treat your son as a qualifying child. Hr block free tax filing This means, if your husband does not claim your son as a qualifying child, you can claim your son as a qualifying child for the dependency exemption, child tax credit, and exclusion for dependent care benefits (if you qualify for each of those tax benefits). Hr block free tax filing However, you cannot claim head of household filing status because you and your husband did not live apart for the last 6 months of the year. Hr block free tax filing As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses. Hr block free tax filing Example 8—separated parents claim same child. Hr block free tax filing The facts are the same as in Example 7 except that you and your husband both claim your son as a qualifying child. Hr block free tax filing In this case, only your husband will be allowed to treat your son as a qualifying child. Hr block free tax filing This is because, during 2013, the boy lived with him longer than with you. Hr block free tax filing If you claimed an exemption or the child tax credit for your son, the IRS will disallow your claim to both these tax benefits. Hr block free tax filing If you do not have another qualifying child or dependent, the IRS will also disallow your claim to the exclusion for dependent care benefits. Hr block free tax filing In addition, because you and your husband did not live apart for the last 6 months of the year, your husband cannot claim head of household filing status. Hr block free tax filing As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses. Hr block free tax filing Example 9—unmarried parents. Hr block free tax filing You, your 5-year-old son, and your son's father lived together all year. Hr block free tax filing You and your son's father are not married. Hr block free tax filing Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, support, and joint return tests for both you and his father. Hr block free tax filing Your AGI is $12,000 and your son's father's AGI is $14,000. Hr block free tax filing Your son's father agrees to let you claim the child as a qualifying child. Hr block free tax filing This means you can claim him as a qualifying child for the dependency exemption, child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, and the earned income credit, if you qualify for each of those tax benefits (and if your son's father does not, in fact, claim your son as a qualifying child for any of those tax benefits). Hr block free tax filing Example 10—unmarried parents claim same child. Hr block free tax filing The facts are the same as in Example 9 except that you and your son's father both claim your son as a qualifying child. Hr block free tax filing In this case, only your son's father will be allowed to treat your son as a qualifying child. Hr block free tax filing This is because his AGI, $14,000, is more than your AGI, $12,000. Hr block free tax filing If you claimed an exemption or the child tax credit for your son, the IRS will disallow your claim to both these tax benefits. Hr block free tax filing If you do not have another qualifying child or dependent, the IRS will also disallow your claim to the earned income credit, head of household filing status, the credit for child and dependent care expenses, and the exclusion for dependent care benefits. Hr block free tax filing Example 11—child did not live with a parent. Hr block free tax filing You and your 7-year-old niece, your sister's child, lived with your mother all year. Hr block free tax filing You are 25 years old, and your AGI is $9,300. Hr block free tax filing Your mother's AGI is $15,000. Hr block free tax filing Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. Hr block free tax filing Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, support, and joint return tests for both you and your mother. Hr block free tax filing However, only your mother can treat her as a qualifying child. Hr block free tax filing This is because your mother's AGI, $15,000, is more than your AGI, $9,300. Hr block free tax filing Applying this special rule to divorced or separated parents (or parents who live apart). Hr block free tax filing   If a child is treated as the qualifying child of the noncustodial parent under the rules described earlier for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. Hr block free tax filing However, the custodial parent, if eligible, or other eligible person can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Hr block free tax filing If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules just explained determine which person can treat the child as a qualifying child. Hr block free tax filing Example 1. Hr block free tax filing You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Hr block free tax filing Your AGI is $10,000. Hr block free tax filing Your mother's AGI is $25,000. Hr block free tax filing Your son's father did not live with you or your son. Hr block free tax filing Under the rules explained earlier for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for him. Hr block free tax filing Because of this, you cannot claim an exemption or the child tax credit for your son. Hr block free tax filing However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. Hr block free tax filing You and your mother did not have any child care expenses or dependent care benefits, so neither of you can claim the credit for child and dependent care expenses or the exclusion for dependent care benefits. Hr block free tax filing But the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. Hr block free tax filing (Note: The support test does not apply for the earned income credit. Hr block free tax filing ) However, you agree to let your mother claim your son. Hr block free tax filing This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. Hr block free tax filing (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. Hr block free tax filing ) Example 2. Hr block free tax filing The facts are the same as in Example 1 except your AGI is $25,000 and your mother's AGI is $21,000. Hr block free tax filing Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Hr block free tax filing Example 3. Hr block free tax filing The facts are the same as in Example 1 except you and your mother both claim your son as a qualifying child for the earned income credit. Hr block free tax filing Your mother also claims him as a qualifying child for head of household filing status. Hr block free tax filing You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. Hr block free tax filing The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Hr block free tax filing Qualifying Relative Four tests must be met for a person to be your qualifying relative. Hr block free tax filing The four tests are: Not a qualifying child test, Member of household or relationship test, Gross income test, and Support test. Hr block free tax filing Age. Hr block free tax filing   Unlike a qualifying child, a qualifying relative can be any age. Hr block free tax filing There is no age test for a qualifying relative. Hr block free tax filing Kidnapped child. Hr block free tax filing   You may be able to treat a child as your qualifying relative even if the child has been kidnapped. Hr block free tax filing See Publication 501 for details. Hr block free tax filing Not a Qualifying Child Test A child is not your qualifying relative if the child is your qualifying child or the qualifying child of any other taxpayer. Hr block free tax filing Example 1. Hr block free tax filing Your 22-year-old daughter, who is a student, lives with you and meets all the tests to be your qualifying child. Hr block free tax filing She is not your qualifying relative. Hr block free tax filing Example 2. Hr block free tax filing Your 2-year-old son lives with your parents and meets all the tests to be their qualifying child. Hr block free tax filing He is not your qualifying relative. Hr block free tax filing Example 3. Hr block free tax filing Your son lives with you but is not your qualifying child because he is 30 years old and does not meet the age test. Hr block free tax filing He may be your qualifying relative if the gross income test and the support test are met. Hr block free tax filing Example 4. Hr block free tax filing Your 13-year-old grandson lived with his mother for 3 months, with his uncle for 4 months, and with you for 5 months during the year. Hr block free tax filing He is not your qualifying child because he does not meet the residency test. Hr block free tax filing He may be your qualifying relative if the gross income test and the support test are met. Hr block free tax filing Child of person not required to file a return. Hr block free tax filing   A child is not the qualifying child of any other taxpayer and so may qualify as your qualifying relative if the child's parent (or other person for whom the child is defined as a qualifying child) is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Hr block free tax filing Example 1—return not required. Hr block free tax filing You support an unrelated friend and her 3-year-old child, who lived with you all year in your home. Hr block free tax filing Your friend has no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Hr block free tax filing Both your friend and her child are your qualifying relatives if the support test is met. Hr block free tax filing Example 2—return filed to claim refund. Hr block free tax filing The facts are the same as in Example 1 except your friend had wages of $1,500 during the year and had income tax withheld from her wages. Hr block free tax filing She files a return only to get a refund of the income tax withheld and does not claim the earned income credit or any other tax credits or deductions. Hr block free tax filing Both your friend and her child are your qualifying relatives if the support test is met. Hr block free tax filing Example 3—earned income credit claimed. Hr block free tax filing The facts are the same as in Example 2 except your friend had wages of $8,000 during the year and claimed the earned income credit on her return. Hr block free tax filing Your friend's child is the qualifying child of another taxpayer (your friend), so you cannot claim your friend's child as your qualifying relative. Hr block free tax filing Child in Canada or Mexico. Hr block free tax filing   You may be able to claim your child as a dependent even if the child lives in Canada or Mexico. Hr block free tax filing If the child does not live with you, the child does not meet the residency test to be your qualifying child. Hr block free tax filing However, the child may still be your qualifying relative. Hr block free tax filing If the persons the child does live with are not U. Hr block free tax filing S. Hr block free tax filing citizens and have no U. Hr block free tax filing S. Hr block free tax filing gross income, those persons are not “taxpayers,” so the child is not the qualifying child of any other taxpayer. Hr block free tax filing If the child is not the qualifying child of any other taxpayer, the child is your qualifying relative as long as the gross income test and the support test are met. Hr block free tax filing   You cannot claim as a dependent a child who lives in a foreign country other than Canada or Mexico, unless the child is a U. Hr block free tax filing S. Hr block free tax filing citizen, U. Hr block free tax filing S. Hr block free tax filing resident alien, or U. Hr block free tax filing S. Hr block free tax filing national. Hr block free tax filing There is an exception for certain adopted children who lived with you all year. Hr block free tax filing See Citizen or Resident Test , earlier. Hr block free tax filing Example. Hr block free tax filing You provide all the support of your children, ages 6, 8, and 12, who live in Mexico with your mother and have no income. Hr block free tax filing You are single and live in the United States. Hr block free tax filing Your mother is not a U. Hr block free tax filing S. Hr block free tax filing citizen and has no U. Hr block free tax filing S. Hr block free tax filing income, so she is not a “taxpayer. Hr block free tax filing ” Your children are not your qualifying children because they do not meet the residency test. Hr block free tax filing But since they are not the qualifying children of any other taxpayer, they are your qualifying relatives and you can claim them as dependents. Hr block free tax filing You may also be able to claim your mother as a dependent if the gross income and support tests are met. Hr block free tax filing Member of Household or Relationship Test To meet this test, a person must either: Live with you all year as a member of your household, or Be related to you in one of the ways listed under Relatives who do not have to live with you . Hr block free tax filing If at any time during the year the person was your spouse, that person cannot be your qualifying relative. Hr block free tax filing However, see Personal Exemptions , earlier. Hr block free tax filing Relatives who do not have to live with you. Hr block free tax filing   A person related to you in any of the following ways does not have to live with you all year as a member of your household to meet this test. Hr block free tax filing Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). Hr block free tax filing (A legally adopted child is considered your child. Hr block free tax filing ) Your brother, sister, half brother, half sister, stepbrother, or stepsister. Hr block free tax filing Your father, mother, grandparent, or other direct ancestor, but not foster parent. Hr block free tax filing Your stepfather or stepmother. Hr block free tax filing A son or daughter of your brother or sister. Hr block free tax filing A son or daughter of your half brother or half sister. Hr block free tax filing A brother or sister of your father or mother. Hr block free tax filing Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Hr block free tax filing Any of these relationships that were established by marriage are not ended by death or divorce. Hr block free tax filing Example. Hr block free tax filing You and your wife began supporting your wife's father, a widower, in 2006. Hr block free tax filing Your wife died in 2012. Hr block free tax filing Despite your wife's death, your father-in-law continues to meet this test, even if he does not live with you. Hr block free tax filing You can claim him as a dependent if all other tests are met, including the gross income test and support test. Hr block free tax filing Foster child. Hr block free tax filing   A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Hr block free tax filing Joint return. Hr block free tax filing   If you file a joint return, the person can be related to either you or your spouse. Hr block free tax filing Also, the person does not need to be related to the spouse who provides support. Hr block free tax filing   For example, your spouse's uncle who receives more than half of his support from you may be your qualifying relative, even though he does not live with you. Hr block free tax filing However, if you and your spouse file separate returns, your spouse's uncle can be your qualifying relative only if he lives with you all year as a member of your household. Hr block free tax filing Temporary absences. Hr block free tax filing   A person is considered to live with you as a member of your household during periods of time when one of you, or both, are temporarily absent due to special circumstances such as: Illness, Education, Business, Vacation, or Military service. Hr block free tax filing   If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence may be considered temporary. Hr block free tax filing Death or birth. Hr block free tax filing   A person who died during the year, but lived with you as a member of your household until death, will meet this test. Hr block free tax filing The same is true for a child who was born during the year and lived with you as a member of your household for the rest of the year. Hr block free tax filing The test is also met if a child lived with you as a member of your household except for any required hospital stay following birth. Hr block free tax filing   If your dependent died during the year and you otherwise qualify to claim an exemption for the dependent, you can still claim the exemption. Hr block free tax filing Example. Hr block free tax filing Your dependent mother died on January 15. Hr block free tax filing She met the tests to be your qualifying relative. Hr block free tax filing The other tests to claim an exemption for a dependent were also met. Hr block free tax filing You can claim an exemption for her on your return. Hr block free tax filing Local law violated. Hr block free tax filing   A person does not meet this test if at any time during the year the relationship between you and that person violates local law. Hr block free tax filing Example. Hr block free tax filing Your girlfriend lived with you as a member of your household all year. Hr block free tax filing However, your relationship with her violated the laws of the state where you live, because she was married to someone else. Hr block free tax filing Therefore, she does not meet this test and you cannot claim her as a dependent. Hr block free tax filing Adopted child. Hr block free tax filing   An adopted child is always treated as your own child. Hr block free tax filing The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Hr block free tax filing Cousin. Hr block free tax filing   Your cousin meets this test only if he or she lives with you all year as a member of your household. Hr block free tax filing A cousin is a descendant of a brother or sister of your father or mother. Hr block free tax filing Gross Income Test To meet this test, a person's gross income for the year must be less than $3,900. Hr block free tax filing Gross income defined. Hr block free tax filing   Gross income is all income in the form of money, property, and services that is not exempt from tax. Hr block free tax filing   In a manufacturing, merchandising, or mining business, gross income is the total net sales minus the cost of goods sold, plus any miscellaneous income from the business. Hr block free tax filing   Gross receipts from rental property are gross income. Hr block free tax filing Do not deduct taxes, repairs, or other expenses, to determine the gross income from rental property. Hr block free tax filing   Gross income includes a partner's share of the gross (not a share of the net) partnership income. Hr block free tax filing    Gross income also includes all taxable unemployment compensation and certain scholarship and fellowship grants. Hr block free tax filing Scholarships received by degree candidates and used for tuition, fees, supplies, books, and equipment required for particular courses generally are not included in gross income. Hr block free tax filing For more information about scholarships, see chapter 12. Hr block free tax filing   Tax-exempt income, such as certain social security benefits, is not included in gross income. Hr block free tax filing Disabled dependent working at sheltered workshop. Hr block free tax filing   For purposes of the gross income test, the gross income of an individual who is permanently and totally disabled at any time during the year does not include income for services the individual performs at a sheltered workshop. Hr block free tax filing The availability of medical care at the workshop must be the main reason for the individual's presence there. Hr block free tax filing Also, the income must come solely from activities at the workshop that are incident to this medical care. Hr block free tax filing   A “sheltered workshop” is a school that: Provides special instruction or training designed to alleviate the disability of the individual, and Is operated by certain tax-exempt organizations, or by a state, a U. Hr block free tax filing S. Hr block free tax filing possession, a political subdivision of a state or possession, the United States, or the District of Columbia. Hr block free tax filing “Permanently and totally disabled” has the same meaning here as under Qualifying Child, earlier. Hr block free tax filing Support Test (To Be a Qualifying Relative) To meet this test, you generally must provide more than half of a person's total support during the calendar year. Hr block free tax filing However, if two or more persons provide support, but no one person provides more than half of a person's total support, see Multiple Support Agreement , later. Hr block free tax filing How to determine if support test is met. Hr block free tax filing   You figure whether you have provided more than half of a person's total support by comparing the amount you contributed to that person's support with the entire amount of support that person received from all sources. Hr block free tax filing This includes support the person provided from his or her own funds. Hr block free tax filing   You may find Worksheet 3-1 helpful in figuring whether you provided more than half of a person's support. Hr block free tax filing Person's own funds not used for support. Hr block free tax filing   A person's own funds are not support unless they are actually spent for support. Hr block free tax filing Example. Hr block free tax filing Your mother received $2,400 in social security benefits and $300 in interest. Hr block free tax filing She paid $2,000 for lodging and $400 for recreation. Hr block free tax filing She put $300 in a savings account. Hr block free tax filing Even though your mother received a total of $2,700 ($2,400 + $300), she spent only $2,400 ($2,000 + $400) for her own support. Hr block free tax filing If you spent more than $2,400 for her support and no other support was received, you have provided more than half of her support. Hr block free tax filing Child's wages used for own support. Hr block free tax filing   You cannot include in your contribution to your child's support any support paid for by the child with the child's own wages, even if you paid the wages. Hr block free tax filing Year support is provided. Hr block free tax filing   The year you provide the support is the year you pay for it, even if you do so with borrowed money that you repay in a later year. Hr block free tax filing   If you use a fiscal year to report your income, you must provide more than half of the dependent's support for the calendar year in which your fiscal year begins. Hr block free tax filing Armed Forces dependency allotments. Hr block free tax filing   The part of the allotment contributed by the government and the part taken out of your military pay are both considered provided by you in figuring whether you provide more than half of the support. Hr block free tax filing If your allotment is used to support persons other than those you name, you can take the exemptions for them if they otherwise qualify. Hr block free tax filing Example. Hr block free tax filing You are in the Armed Forces. Hr block free tax filing You authorize an allotment for your widowed mother that she uses to support herself and her sister. Hr block free tax filing If the allotment provides more than half of each person's support, you can take an exemption for each of them, if they otherwise qualify, even though you authorize the allotment only for your mother. Hr block free tax filing Tax-exempt military quarters allowances. Hr block free tax filing   These allowances are treated the same way as dependency allotments in figuring support. Hr block free tax filing The allotment of pay and the tax-exempt basic allowance for quarters are both considered as provided by you for support. Hr block free tax filing Tax-exempt income. Hr block free tax filing   In figuring a person's total support, include tax-exempt income, savings, and borrowed amounts used to support that person. Hr block free tax filing Tax-exempt income includes certain social security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest. Hr block free tax filing Example 1. Hr block free tax filing You provide $4,000 toward your mother's support during the year. Hr block free tax filing She has earned income of $600, nontaxable social security benefits of $4,800, and tax-exempt interest of $200. Hr block free tax filing She uses all these for her support. Hr block free tax filing You cannot claim an exemption for your mother because the $4,000 you provide is not more than half of her total support of $9,600 ($4,000 + $600 + $4,800 + $200). Hr block free tax filing Example 2. Hr block free tax filing Your niece takes out a student loan of $2,500 a