File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Indiana State Tax Forms 2011

Irs Amended Tax Return 2011Tax Software 20112010 Federal Tax Form 1040How To Make A Tax AmendmentFree E File Form 4868Free Federal And Free State Tax FilingMontana State Tax Form 2011Income Tax ExtensionElectronic File 1040ezTaxes MilitaryFiling An Amended Tax Return For 20111040ez TaxesFree State Tax FilingFile Just State Taxes Online FreeAmend Federal Tax Return FreeFile 1040ez FreeFiling 2011 Taxes Late TurbotaxGov Forms 1040Vita Free Tax HelpHow To Fill Out 1040ez FormFile Tax ReturnUs Irs E File Free2006 Tax ReturnH R Block 2011 DownloadHelp With 1040xFree Online State Income Tax FilingBlank Printable 1040ez FormPrintable 1040ez Tax FormTurbo Tax Free MilitaryH And R Block Free State1040 Ez InstructionsState Unemployment Tax1040ez Tax Form 2012Irs Tax Amendment Form InstructionsTax Form 1040x OnlineFree Turbo Tax FilingTax Act 20092012 State Taxes Online FreeHow To File Amended Tax Return For 2010Turbo State Tax Free

Indiana State Tax Forms 2011

Indiana state tax forms 2011 4. Indiana state tax forms 2011   Unrelated Business Taxable Income Table of Contents IncomeExclusions Dues of Agricultural Organizations and Business Leagues DeductionsDirectly Connected Exploitation of Exempt Activity—Advertising Sales Modifications Partnership Income or Loss S Corporation Income or Loss Special Rules for Foreign Organizations Special Rules for Social Clubs, VEBAs, SUBs, and GLSOsIncome that is set aside. Indiana state tax forms 2011 Special Rules for Veterans' Organizations Income From Controlled OrganizationsAddition to tax for valuation misstatements. Indiana state tax forms 2011 Net unrelated income. Indiana state tax forms 2011 Net unrelated loss. Indiana state tax forms 2011 Control. Indiana state tax forms 2011 Income from property financed with qualified 501(c)(3) bonds. Indiana state tax forms 2011 Disposition of property received from taxable subsidiary and used in unrelated business. Indiana state tax forms 2011 Income From Debt-Financed Property Debt-Financed PropertyAcquisition Indebtedness Computation of Debt-Financed Income Deductions for Debt-Financed Property Allocation Rules How to Get Tax Help The term “unrelated business taxable income” generally means the gross income derived from any unrelated trade or business regularly conducted by the exempt organization, less the deductions directly connected with carrying on the trade or business. Indiana state tax forms 2011 If an organization regularly carries on two or more unrelated business activities, its unrelated business taxable income is the total of gross income from all such activities less the total allowable deductions attributable to all the activities. Indiana state tax forms 2011 In computing unrelated business taxable income, gross income and deductions are subject to the modifications and special rules explained in this chapter. Indiana state tax forms 2011 Whether a particular item of income or expense falls within any of these modifications or special rules must be determined by all the facts and circumstances in each specific case. Indiana state tax forms 2011 For example, if the organization received a payment termed rent that is in fact a return of profits by a person operating the property for the benefit of the organization, or that is a share of the profits retained by the organization as a partner or joint venturer, the payment is not within the income exclusion for rents, discussed later under Exclusions. Indiana state tax forms 2011 Income Generally, unrelated business income is taxable, but there are exclusions and special rules that must be considered when figuring the income. Indiana state tax forms 2011 Exclusions The following types of income (and deductions directly connected with the income) are generally excluded when figuring unrelated business taxable income. Indiana state tax forms 2011 Dividends, interest, annuities and other investment income. Indiana state tax forms 2011   All dividends, interest, annuities, payments with respect to securities loans, income from notional principal contracts, and other income from an exempt organization's ordinary and routine investments that the IRS determines are substantially similar to these types of income are excluded in computing unrelated business taxable income. Indiana state tax forms 2011 Exception for insurance activity income of a controlled foreign corporation. Indiana state tax forms 2011   This exclusion does not apply to income from certain insurance activities of an exempt organization's controlled foreign corporation. Indiana state tax forms 2011 The income is not excludable dividend income, but instead is unrelated business taxable income to the extent it would be so treated if the exempt organization had earned it directly. Indiana state tax forms 2011 Certain exceptions to this rule apply. Indiana state tax forms 2011 For more information, see section 512(b)(17). Indiana state tax forms 2011 Other exceptions. Indiana state tax forms 2011   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), to interest or annuities received from a controlled corporation (discussed under Income From Controlled Organizations, later). Indiana state tax forms 2011 Income from lending securities. Indiana state tax forms 2011   Payments received with respect to a security loan are excluded in computing unrelated business taxable income only if the loan is made under an agreement that:    Provides for the return to the exempt organization of securities identical to the securities loaned, Requires payments to the organization of amounts equivalent to all interest, dividends, and other distributions that the owner of the securities is entitled to receive during the period of the loan, Does not reduce the organization's risk of loss or opportunity for gain on the securities, Contains reasonable procedures to implement the obligation of the borrower to furnish collateral to the organization with a fair market value each business day during the period of the loan in an amount not less than the fair market value of the securities at the close of the preceding business day, and Permits the organization to terminate the loan upon notice of not more than 5 business days. Indiana state tax forms 2011   Payments with respect to securities loans include: Amounts in respect of dividends, interest, and other distributions, Fees based on the period of time the loan is in effect and the fair market value of the security during that period, Income from collateral security for the loan, and Income from the investment of collateral security. Indiana state tax forms 2011 The payments are considered to be from the securities loaned and not from collateral security or the investment of collateral security from the loans. Indiana state tax forms 2011 Any deductions that are directly connected with collateral security for the loan, or with the investment of collateral security, are considered deductions that are directly connected with the securities loaned. Indiana state tax forms 2011 Royalties. Indiana state tax forms 2011   Royalties, including overriding royalties, are excluded in computing unrelated business taxable income. Indiana state tax forms 2011   To be considered a royalty, a payment must relate to the use of a valuable right. Indiana state tax forms 2011 Payments for trademarks, trade names, or copyrights are ordinarily considered royalties. Indiana state tax forms 2011 Similarly, payments for the use of a professional athlete's name, photograph, likeness, or facsimile signature are ordinarily considered royalties. Indiana state tax forms 2011 However, royalties do not include payments for personal services. Indiana state tax forms 2011 Therefore, payments for personal appearances and interviews are not excluded as royalties and must be included in figuring unrelated business taxable income. Indiana state tax forms 2011   Unrelated business taxable income does not include royalty income received from licensees by an exempt organization that is the legal and beneficial owner of patents assigned to it by inventors for specified percentages of future royalties. Indiana state tax forms 2011   Mineral royalties are excluded whether measured by production or by gross or taxable income from the mineral property. Indiana state tax forms 2011 However, the exclusion does not apply to royalties that stem from an arrangement whereby the organization owns a working interest in a mineral property and is liable for its share of the development and operating costs under the terms of its agreement with the operator of the property. Indiana state tax forms 2011 To the extent they are not treated as loans under section 636 (relating to income tax treatment of mineral production payments), payments for mineral production are treated in the same manner as royalty payments for the purpose of computing unrelated business taxable income. Indiana state tax forms 2011 To the extent they are treated as loans, any payments for production that are the equivalent of interest are treated as interest and are excluded. Indiana state tax forms 2011 Exceptions. Indiana state tax forms 2011   This exclusion does not apply to debt-financed income (discussed under Income From Debt-Financed Property, later) or to royalties received from a controlled corporation (discussed under Income From Controlled Organizations, later). Indiana state tax forms 2011 Rents. Indiana state tax forms 2011   Rents from real property, including elevators and escalators, are excluded in computing unrelated business taxable income. Indiana state tax forms 2011 Rents from personal property are not excluded. Indiana state tax forms 2011 However, special rules apply to “mixed leases” of both real and personal property. Indiana state tax forms 2011 Mixed leases. Indiana state tax forms 2011   In a mixed lease, all of the rents are excluded if the rents attributable to the personal property are not more than 10% of the total rents under the lease, as determined when the personal property is first placed in service by the lessee. Indiana state tax forms 2011 If the rents attributable to personal property are more than 10% but not more than 50% of the total rents, only the rents attributable to the real property are excluded. Indiana state tax forms 2011 If the rents attributable to the personal property are more than 50% of the total rents, none of the rents are excludable. Indiana state tax forms 2011   Property is placed in service when the lessee first may use it under the terms of a lease. Indiana state tax forms 2011 For example, property subject to a lease entered into on November 1, for a term starting on January 1 of the next year, is considered placed in service on January 1, regardless of when the lessee first actually uses it. Indiana state tax forms 2011   If separate leases are entered into for real and personal property and the properties have an integrated use (for example, one or more leases for real property and another lease or leases for personal property to be used on the real property), all the leases will be considered as one lease. Indiana state tax forms 2011   The rent attributable to the personal property must be recomputed, and the treatment of the rents must be redetermined, if: The rent attributable to all the leased personal property increases by 100% or more because additional or substitute personal property is placed in service, or The lease is modified to change the rent charged (whether or not the amount of rented personal property changes). Indiana state tax forms 2011 Any change in the treatment of rents resulting from the recomputation is effective only for the period beginning with the event that caused the recomputation. Indiana state tax forms 2011 Exception for rents based on net profit. Indiana state tax forms 2011   The exclusion for rents does not apply if the amount of the rent depends on the income or profits derived by any person from the leased property, other than an amount based on a fixed percentage of the gross receipts or sales. Indiana state tax forms 2011 Exception for income from personal services. Indiana state tax forms 2011   Payment for occupying space when personal services are also rendered to the occupant does not constitute rent from real property. Indiana state tax forms 2011 Therefore, the exclusion does not apply to transactions such as renting hotel rooms, rooms in boarding houses or tourist homes, and space in parking lots or warehouses. Indiana state tax forms 2011 Other exceptions. Indiana state tax forms 2011   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), or to interest, annuities, royalties and rents received from a controlled corporation (discussed under Income From Controlled Organizations, later), investment income (dividends, interest, rents, etc. Indiana state tax forms 2011 ) received by organizations described in sections 501(c)(7), 501(c)(9), 501(c)(17), and 501(c)(20). Indiana state tax forms 2011 See Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs, discussed later for more information. Indiana state tax forms 2011 Income from research. Indiana state tax forms 2011   A tax-exempt organization may exclude income from research grants or contracts from unrelated business taxable income. Indiana state tax forms 2011 However, the extent of the exclusion depends on the nature of the organization and the type of research. Indiana state tax forms 2011   Income from research for the United States, any of its agencies or instrumentalities, or a state or any of its political subdivisions is excluded when computing unrelated business taxable income. Indiana state tax forms 2011   For a college, university, or hospital, all income from research, whether fundamental or applied, is excluded in computing unrelated business taxable income. Indiana state tax forms 2011   When an organization is operated primarily to conduct fundamental research (as distinguished from applied research) and the results are freely available to the general public, all income from research performed for any person is excluded in computing unrelated business taxable income. Indiana state tax forms 2011   The term research, for this purpose, does not include activities of a type normally conducted as an incident to commercial or industrial operations, such as testing or inspecting materials or products, or designing or constructing equipment, buildings, etc. Indiana state tax forms 2011 In addition, the term fundamental research does not include research conducted for the primary purpose of commercial or industrial application. Indiana state tax forms 2011 Gains and losses from disposition of property. Indiana state tax forms 2011   Also excluded from unrelated business taxable income are gains or losses from the sale, exchange, or other disposition of property other than: Stock in trade or other property of a kind that would properly be includable in inventory if on hand at the close of the tax year, Property held primarily for sale to customers in the ordinary course of a trade or business, or Cutting of timber that an organization has elected to consider as a sale or exchange of the timber. Indiana state tax forms 2011   It should be noted that the last exception relates only to cut timber. Indiana state tax forms 2011 The sale, exchange, or other disposition of standing timber is excluded from the computation of unrelated business income, unless it constitutes property held for sale to customers in the ordinary course of business. Indiana state tax forms 2011 Lapse or termination of options. Indiana state tax forms 2011   Any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. Indiana state tax forms 2011 The exclusion applies only if the option is written in connection with the exempt organization's investment activities. Indiana state tax forms 2011 Therefore, this exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. Indiana state tax forms 2011 Exception. Indiana state tax forms 2011   This exclusion does not apply to unrelated debt-financed income, discussed later under Income From Debt-Financed Property. Indiana state tax forms 2011 Gain or loss on disposition of certain brownfield property. Indiana state tax forms 2011   Gain or loss from the qualifying sale, exchange, or other disposition of a qualifying brownfield property (as defined in section 512(b)(19)(C)), which was acquired by the organization after December 31, 2005 and before January 1, 2011, is excluded from unrelated business taxable income and is excepted from the debt-financed rules for such property. Indiana state tax forms 2011 See sections 512(b)(19) and 514(b)(1)(E). Indiana state tax forms 2011 Income from services provided under federal license. Indiana state tax forms 2011   There is a further exclusion from unrelated business taxable income of income from a trade or business conducted by a religious order or by an educational organization maintained by the order. Indiana state tax forms 2011   This exclusion applies only if the following requirements are met. Indiana state tax forms 2011 The trade or business must have been operated by the order or by the institution before May 27, 1959. Indiana state tax forms 2011 The trade or business must provide services under a license issued by a federal regulatory agency. Indiana state tax forms 2011 More than 90% of the net income from the business for the tax year must be devoted to religious, charitable, or educational purposes that constitute the basis for the religious order's exemption. Indiana state tax forms 2011 The rates or other charges for these services must be fully competitive with the rates or other charges of similar taxable businesses. Indiana state tax forms 2011 Rates or other charges for these services will be considered as fully competitive if they are neither materially higher nor materially lower than the rates charged by similar businesses operating in the same general area. Indiana state tax forms 2011 Exception. Indiana state tax forms 2011    This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later). Indiana state tax forms 2011 Member income of mutual or cooperative electric companies. Indiana state tax forms 2011   Income of a mutual or cooperative electric company described in section 501(c)(12) which is treated as member income under subparagraph (H) of that section is excluded from unrelated business taxable income. Indiana state tax forms 2011 Dues of Agricultural Organizations and Business Leagues Dues received from associate members by organizations exempt under section 501(c)(5) or section 501(c)(6) may be treated as gross income from an unrelated trade or business if the associate member category exists for the principal purpose of producing unrelated business income. Indiana state tax forms 2011 For example, if an organization creates an associate member category solely to allow associate members to purchase insurance through the organization, the associate member dues may be unrelated business income. Indiana state tax forms 2011 Exception. Indiana state tax forms 2011   Associate member dues received by an agricultural or horticultural organization are not treated as gross income from an unrelated trade or business, regardless of their purpose, if they are not more than the annual limit. Indiana state tax forms 2011 The limit on dues paid by an associate member is $148 for 2011. Indiana state tax forms 2011   If the required annual dues are more than the limit, the entire amount is treated as income from an unrelated business unless the associate member category was formed or availed of for the principal purpose of furthering the organization's exempt purposes. Indiana state tax forms 2011 Deductions To qualify as allowable deductions in computing unrelated business taxable income, the expenses, depreciation, and similar items generally must be allowable income tax deductions that are directly connected with carrying on an unrelated trade or business. Indiana state tax forms 2011 They cannot be directly connected with excluded income. Indiana state tax forms 2011 For an exception to the “directly connected” requirement, see Charitable contributions deduction, under Modifications, later. Indiana state tax forms 2011 Directly Connected To be directly connected with the conduct of an unrelated business, deductions must have a proximate and primary relationship to carrying on that business. Indiana state tax forms 2011 For an exception, see Expenses attributable to exploitation of exempt activities, later. Indiana state tax forms 2011 Expenses attributable solely to unrelated business. Indiana state tax forms 2011   Expenses, depreciation, and similar items attributable solely to the conduct of an unrelated business are proximately and primarily related to that business and qualify for deduction to the extent that they are otherwise allowable income tax deductions. Indiana state tax forms 2011   For example, salaries of personnel employed full-time to conduct the unrelated business and depreciation of a building used entirely in the conduct of that business are deductible to the extent otherwise allowable. Indiana state tax forms 2011 Expenses attributable to dual use of facilities or personnel. Indiana state tax forms 2011   When facilities or personnel are used both to conduct exempt functions and to conduct an unrelated trade or business, expenses, depreciation, and similar items attributable to the facilities or personnel must be allocated between the two uses on a reasonable basis. Indiana state tax forms 2011 The part of an item allocated to the unrelated trade or business is proximately and primarily related to that business and is allowable as a deduction in computing unrelated business taxable income if the expense is otherwise an allowable income tax deduction. Indiana state tax forms 2011 Example 1. Indiana state tax forms 2011 A school recognized as a tax-exempt organization contracts with an individual to conduct a summer tennis camp. Indiana state tax forms 2011 The school provides the tennis courts, housing, and dining facilities. Indiana state tax forms 2011 The contracted individual hires the instructors, recruits campers, and provides supervision. Indiana state tax forms 2011 The income the school receives from this activity is from a dual use of the facilities and personnel. Indiana state tax forms 2011 The school, in computing its unrelated business taxable income, may deduct an allocable part of the expenses attributable to the facilities and personnel. Indiana state tax forms 2011 Example 2. Indiana state tax forms 2011 An exempt organization with gross income from an unrelated trade or business pays its president $90,000 a year. Indiana state tax forms 2011 The president devotes approximately 10% of his time to the unrelated business. Indiana state tax forms 2011 To figure the organization's unrelated business taxable income, a deduction of $9,000 ($90,000 × 10%) is allowed for the salary paid to its president. Indiana state tax forms 2011 Expenses attributable to exploitation of exempt activities. Indiana state tax forms 2011   Generally, expenses, depreciation, and similar items attributable to the conduct of an exempt activity are not deductible in computing unrelated business taxable income from an unrelated trade or business that exploits the exempt activity. Indiana state tax forms 2011 (See Exploitation of exempt functions under Not substantially related in chapter 3. Indiana state tax forms 2011 ) This is because they do not have a proximate and primary relationship to the unrelated trade or business, and therefore, they do not qualify as directly connected with that business. Indiana state tax forms 2011 Exception. Indiana state tax forms 2011   Expenses, depreciation, and similar items may be treated as directly connected with the conduct of the unrelated business if all the following statements are true. Indiana state tax forms 2011 The unrelated business exploits the exempt activity. Indiana state tax forms 2011 The unrelated business is a type normally conducted for profit by taxable organizations. Indiana state tax forms 2011 The exempt activity is a type normally conducted by taxable organizations in carrying on that type of business. Indiana state tax forms 2011 The amount treated as directly connected is the smaller of: The excess of these expenses, depreciation, and similar items over the income from, or attributable to, the exempt activity; or The gross unrelated business income reduced by all other expenses, depreciation, and other items that are actually directly connected. Indiana state tax forms 2011   The application of these rules to an advertising activity that exploits an exempt publishing activity is explained next. Indiana state tax forms 2011 Exploitation of Exempt Activity—Advertising Sales The sale of advertising in a periodical of an exempt organization that contains editorial material related to the accomplishment of the organization's exempt purpose is an unrelated business that exploits an exempt activity, the circulation and readership of the periodical. Indiana state tax forms 2011 Therefore, in addition to direct advertising costs, exempt activity costs (expenses, depreciation, and similar expenses attributable to the production and distribution of the editorial or readership content) can be treated as directly connected with the conduct of the advertising activity. Indiana state tax forms 2011 (See Expenses attributable to exploitation of exempt activities under Directly Connected, earlier. Indiana state tax forms 2011 ) Figuring unrelated business taxable income (UBTI). Indiana state tax forms 2011   The UBTI of an advertising activity is the amount shown in the following chart. Indiana state tax forms 2011 IF gross advertising income is . Indiana state tax forms 2011 . Indiana state tax forms 2011 . Indiana state tax forms 2011 THEN UBTI is . Indiana state tax forms 2011 . Indiana state tax forms 2011 . Indiana state tax forms 2011 More than direct advertising costs The excess advertising income, reduced (but not below zero) by the excess, if any, of readership costs over circulation income. Indiana state tax forms 2011 Equal to or less than direct advertising costs Zero. Indiana state tax forms 2011   • Circulation income and readership costs are not taken into account. Indiana state tax forms 2011   • Any excess advertising costs reduce (but not below zero) UBTI from any other unrelated business activity. Indiana state tax forms 2011   The terms used in the chart are explained in the following discussions. Indiana state tax forms 2011 Periodical Income Gross advertising income. Indiana state tax forms 2011   This is all the income from the unrelated advertising activities of an exempt organization periodical. Indiana state tax forms 2011 Circulation income. Indiana state tax forms 2011   This is all the income from the production, distribution, or circulation of an exempt organization's periodical (other than gross advertising income). Indiana state tax forms 2011 It includes all amounts from the sale or distribution of the readership content of the periodical, such as income from subscriptions. Indiana state tax forms 2011 It also includes allocable membership receipts if the right to receive the periodical is associated with a membership or similar status in the organization. Indiana state tax forms 2011 Allocable membership receipts. Indiana state tax forms 2011   This is the part of membership receipts (dues, fees, or other charges associated with membership) equal to the amount that would have been charged and paid for the periodical if: The periodical was published by a taxable organization, The periodical was published for profit, and The member was an unrelated party dealing with the taxable organization at arm's length. Indiana state tax forms 2011   The amount used to allocate membership receipts is the amount shown in the following chart. Indiana state tax forms 2011   For this purpose, the total periodical costs are the sum of the direct advertising costs and the readership costs, explained under Periodical Costs, later. Indiana state tax forms 2011 The cost of other exempt activities means the total expenses incurred by the organization in connection with its other exempt activities, not offset by any income earned by the organization from those activities. Indiana state tax forms 2011 IF . Indiana state tax forms 2011 . Indiana state tax forms 2011 . Indiana state tax forms 2011 THEN the amount used to allocate membership receipts is . Indiana state tax forms 2011 . Indiana state tax forms 2011 . Indiana state tax forms 2011 20% or more of the total circulation consists of sales to nonmembers The subscription price charged nonmembers. Indiana state tax forms 2011 The above condition does not apply, and 20% or more of the members pay reduced dues because they do not receive the periodical The reduction in dues for a member not receiving the periodical. Indiana state tax forms 2011 Neither of the above conditions applies The membership receipts multiplied by this fraction:   Total periodical costs Total periodical costs Plus Cost of other exempt activities Example 1. Indiana state tax forms 2011 U is an exempt scientific organization with 10,000 members who pay annual dues of $15. Indiana state tax forms 2011 One of U's activities is publishing a monthly periodical distributed to all of its members. Indiana state tax forms 2011 U also distributes 5,000 additional copies of its periodical to nonmembers, who subscribe for $10 a year. Indiana state tax forms 2011 Since the nonmember circulation of U's periodical represents one-third (more than 20%) of its total circulation, the subscription price charged to nonmembers is used to determine the part of U's membership receipts allocable to the periodical. Indiana state tax forms 2011 Thus, U's allocable membership receipts are $100,000 ($10 times 10,000 members), and U's total circulation income for the periodical is $150,000 ($100,000 from members plus $50,000 from sales to nonmembers). Indiana state tax forms 2011 Example 2. Indiana state tax forms 2011 Assume the same facts except that U sells only 500 copies of its periodical to nonmembers, at a price of $10 a year. Indiana state tax forms 2011 Assume also that U's members may elect not to receive the periodical, in which case their dues are reduced from $15 a year to $6 a year, and that only 3,000 members elect to receive the periodical and pay the full dues of $15 a year. Indiana state tax forms 2011 U's stated subscription price of $9 to members consistently results in an excess of total income (including gross advertising income) attributable to the periodical over total costs of the periodical. Indiana state tax forms 2011 Since the 500 copies of the periodical distributed to nonmembers represent only 14% of the 3,500 copies distributed, the $10 subscription price charged to nonmembers is not used to determine the part of membership receipts allocable to the periodical. Indiana state tax forms 2011 Instead, since 70% of the members elect not to receive the periodical and pay $9 less per year in dues, the $9 price is used to determine the subscription price charged to members. Indiana state tax forms 2011 Thus, the allocable membership receipts will be $9 a member, or $27,000 ($9 times 3,000 copies). Indiana state tax forms 2011 U's total circulation income is $32,000 ($27,000 plus the $5,000 from nonmember subscriptions). Indiana state tax forms 2011 Periodical Costs Direct advertising costs. Indiana state tax forms 2011   These are expenses, depreciation, and similar items of deduction directly connected with selling and publishing advertising in the periodical. Indiana state tax forms 2011   Examples of allowable deductions under this classification include agency commissions and other direct selling costs, such as transportation and travel expenses, office salaries, promotion and research expenses, and office overhead directly connected with the sale of advertising lineage in the periodical. Indiana state tax forms 2011 Also included are other deductions commonly classified as advertising costs under standard account classifications, such as artwork and copy preparation, telephone, telegraph, postage, and similar costs directly connected with advertising. Indiana state tax forms 2011   In addition, direct advertising costs include the part of mechanical and distribution costs attributable to advertising lineage. Indiana state tax forms 2011 For this purpose, the general account classifications of items includable in mechanical and distribution costs ordinarily employed in business-paper and consumer-publication accounting provide a guide for the computation. Indiana state tax forms 2011 Accordingly, the mechanical and distribution costs include the part of the costs and other expenses of composition, press work, binding, mailing (including paper and wrappers used for mailing), and bulk postage attributable to the advertising lineage of the publication. Indiana state tax forms 2011   In the absence of specific and detailed records, the part of mechanical and distribution costs attributable to the periodical's advertising lineage can be based on the ratio of advertising lineage to total lineage in the periodical, if this allocation is reasonable. Indiana state tax forms 2011 Readership costs. Indiana state tax forms 2011   These are all expenses, depreciation, and similar items that are directly connected with the production and distribution of the readership content of the periodical. Indiana state tax forms 2011 Costs partly attributable to other activities. Indiana state tax forms 2011   Deductions properly attributable to exempt activities other than publishing the periodical may not be allocated to the periodical. Indiana state tax forms 2011 When expenses are attributable both to the periodical and to the organization's other activities, an allocation must be made on a reasonable basis. Indiana state tax forms 2011 The method of allocation will vary with the nature of the item, but once adopted, should be used consistently. Indiana state tax forms 2011 Allocations based on dollar receipts from various exempt activities generally are not reasonable since receipts usually do not accurately reflect the costs associated with specific activities that an exempt organization conducts. Indiana state tax forms 2011 Consolidated Periodicals If an exempt organization publishes more than one periodical to produce income, it may treat all of them (but not less than all) as one in determining unrelated business taxable income from selling advertising. Indiana state tax forms 2011 It treats the gross income from all the periodicals, and the deductions directly connected with them, on a consolidated basis. Indiana state tax forms 2011 Consolidated treatment, once adopted, must be followed consistently and is binding. Indiana state tax forms 2011 This treatment can be changed only with the consent of the Internal Revenue Service. Indiana state tax forms 2011 An exempt organization's periodical is published to produce income if: The periodical generates gross advertising income to the organization equal to at least 25% of its readership costs, and Publishing the periodical is an activity engaged in for profit. Indiana state tax forms 2011 Whether the publication of a periodical is an activity engaged in for profit can be determined only by all the facts and circumstances in each case. Indiana state tax forms 2011 The facts and circumstances must show that the organization carries on the activity for economic profit, although there may not be a profit in a particular year. Indiana state tax forms 2011 For example, if an organization begins publishing a new periodical whose total costs exceed total income in the start-up years because of lack of advertising sales, that does not mean that the organization did not have as its objective an economic profit. Indiana state tax forms 2011 The organization may establish that it had this objective by showing it can reasonably expect advertising sales to increase, so that total income will exceed costs within a reasonable time. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 Y, an exempt trade association, publishes three periodicals that it distributes to its members: a weekly newsletter, a monthly magazine, and a quarterly journal. Indiana state tax forms 2011 Both the monthly magazine and the quarterly journal contain advertising that accounts for gross advertising income equal to more than 25% of their respective readership costs. Indiana state tax forms 2011 Similarly, the total income attributable to each periodical has exceeded the total deductions attributable to each periodical for substantially all the years they have been published. Indiana state tax forms 2011 The newsletter carries no advertising and its annual subscription price is not intended to cover the cost of publication. Indiana state tax forms 2011 The newsletter is a service that Y distributes to all of its members in an effort to keep them informed of changes occurring in the business world. Indiana state tax forms 2011 It is not engaged in for profit. Indiana state tax forms 2011 Under these circumstances, Y may consolidate the income and deductions from the monthly and quarterly journals in computing its unrelated business taxable income. Indiana state tax forms 2011 It may not consolidate the income and deductions from the newsletter with the income and deductions of its other periodicals, since the newsletter is not published for the production of income. Indiana state tax forms 2011 Modifications Net operating loss deduction. Indiana state tax forms 2011   The net operating loss (NOL) deduction (as provided in section 172) is allowed in computing unrelated business taxable income. Indiana state tax forms 2011 However, the NOL for any tax year, the carrybacks and carryovers of NOLs, and the NOL deduction are determined without taking into account any amount of income or deduction that has been specifically excluded in computing unrelated business taxable income. Indiana state tax forms 2011 For example, a loss from an unrelated trade or business is not diminished because dividend income was received. Indiana state tax forms 2011   If this were not done, organizations would, in effect, be taxed on their exempt income, since unrelated business losses then would be offset by dividends, interest, and other excluded income. Indiana state tax forms 2011 This would reduce the loss that could be applied against unrelated business income of prior or future tax years. Indiana state tax forms 2011 Therefore, to preserve the immunity of exempt income, all NOL computations are limited to those items of income and deductions that affect the unrelated business taxable income. Indiana state tax forms 2011   In line with this concept, an NOL carryback or carryover is allowed only from a tax year for which the organization is subject to tax on unrelated business income. Indiana state tax forms 2011   For example, if an organization just became subject to the tax last year, its NOL for that year is not a carryback to a prior year when it had no unrelated business taxable income, nor is its NOL carryover to succeeding years reduced by the related income of those prior years. Indiana state tax forms 2011   However, in determining the span of years for which an NOL may be carried back or forward, the tax years for which the organization is not subject to the tax on unrelated business income are counted. Indiana state tax forms 2011 For example, if an organization was subject to the tax for 2009 and had an NOL for that year, the last tax year to which any part of that loss may be carried over is 2029, regardless of whether the organization was subject to the unrelated business income tax in any of the intervening years. Indiana state tax forms 2011   For more details on the NOL deduction, including property eligible for an extended carryback period, see sections 172 and 1400N, Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Indiana state tax forms 2011 Charitable contributions deduction. Indiana state tax forms 2011   An exempt organization is allowed to deduct its charitable contributions in computing its unrelated business taxable income whether or not the contributions are directly connected with the unrelated business. Indiana state tax forms 2011   To be deductible, the contribution must be paid to another qualified organization. Indiana state tax forms 2011 For example, an exempt university that operates an unrelated business may deduct a contribution made to another university for educational work, but may not claim a deduction for contributions of amounts spent for carrying out its own educational program. Indiana state tax forms 2011   For purposes of the deduction, a distribution by a trust made under the trust instrument to a beneficiary, which itself is a qualified organization, is treated the same as a contribution. Indiana state tax forms 2011 Deduction limits. Indiana state tax forms 2011   An exempt organization that is subject to the unrelated business income tax at corporate rates is allowed a deduction for charitable contributions up to 10% of its unrelated business taxable income computed without regard to the deduction for contributions. Indiana state tax forms 2011 See the Instructions for Form 990-T for more information. Indiana state tax forms 2011    An exempt trust that is subject to the unrelated business income tax at trust rates generally is allowed a deduction for charitable contributions in the same amounts as allowed for individuals. Indiana state tax forms 2011 However, the limit on the deduction is determined in relation to the trust's unrelated business taxable income computed without regard to the deduction, rather than in relation to adjusted gross income. Indiana state tax forms 2011   Contributions in excess of the limits just described may be carried over to the next 5 tax years. Indiana state tax forms 2011 A contribution carryover is not allowed, however, to the extent that it increases an NOL carryover. Indiana state tax forms 2011 Suspension of deduction limits for farmers and ranchers. Indiana state tax forms 2011   The limitations discussed above are temporarily suspended for certain qualified conservation contributions of property used in agriculture or livestock production. Indiana state tax forms 2011 See the Instructions for Form 990-T for details. Indiana state tax forms 2011 Specific deduction. Indiana state tax forms 2011   In computing unrelated business taxable income, a specific deduction of $1,000 is allowed. Indiana state tax forms 2011 However, the specific deduction is not allowed in computing an NOL or the NOL deduction. Indiana state tax forms 2011   Generally, the deduction is limited to $1,000 regardless of the number of unrelated businesses in which the organization is engaged. Indiana state tax forms 2011 Exception. Indiana state tax forms 2011   An exception is provided in the case of a diocese, province of a religious order, or a convention or association of churches that may claim a specific deduction for each parish, individual church, district, or other local unit. Indiana state tax forms 2011 In these cases, the specific deduction for each local unit is limited to the lower of: $1,000, or Gross income derived from an unrelated trade or business regularly conducted by the local unit. Indiana state tax forms 2011   This exception applies only to parishes, districts, or other local units that are not separate legal entities, but are components of a larger entity (diocese, province, convention, or association) filing Form 990-T. Indiana state tax forms 2011 The parent organization must file a return reporting the unrelated business gross income and related deductions of all units that are not separate legal entities. Indiana state tax forms 2011 The local units cannot file separate returns. Indiana state tax forms 2011 However, each local unit that is separately incorporated must file its own return and cannot include, or be included with, any other entity. Indiana state tax forms 2011 See Title-holding corporations in chapter 1 for a discussion of the only situation in which more than one legal entity may be included on the same Form 990-T. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 X is an association of churches and is divided into local units A, B, C, and D. Indiana state tax forms 2011 Last year, A, B, C, and D derived gross income of, respectively, $1,200, $800, $1,500, and $700 from unrelated businesses that they regularly conduct. Indiana state tax forms 2011 X may claim a specific deduction of $1,000 with respect to A, $800 with respect to B, $1,000 with respect to C, and $700 with respect to D. Indiana state tax forms 2011 Partnership Income or Loss An organization may have unrelated business income or loss as a member of a partnership, rather than through direct business dealings with the public. Indiana state tax forms 2011 If so, it must treat its share of the partnership income or loss as if it had conducted the business activity in its own capacity as a corporation or trust. Indiana state tax forms 2011 No distinction is made between limited and general partners. Indiana state tax forms 2011 The organization is required to notify the partnership of its tax-exempt status. Indiana state tax forms 2011 Thus, if an organization is a member of a partnership regularly engaged in a trade or business that is an unrelated trade or business with respect to the organization, the organization must include in its unrelated business taxable income its share of the partnership's gross income from the unrelated trade or business (whether or not distributed), and the deductions attributable to it. Indiana state tax forms 2011 The partnership income and deductions to be included in the organization's unrelated business taxable income are figured the same way as any income and deductions from an unrelated trade or business conducted directly by the organization. Indiana state tax forms 2011 The partnership is required to provide the organization this information on Schedule K-1. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 An exempt educational organization is a partner in a partnership that operates a factory. Indiana state tax forms 2011 The partnership also holds stock in a corporation. Indiana state tax forms 2011 The exempt organization must include its share of the gross income from operating the factory in its unrelated business taxable income but may exclude its share of any dividends the partnership received from the corporation. Indiana state tax forms 2011 Different tax years. Indiana state tax forms 2011   If the exempt organization and the partnership of which it is a member have different tax years, the partnership items that enter into the computation of the organization's unrelated business taxable income must be based on the income and deductions of the partnership for the partnership's tax year that ends within or with the organization's tax year. Indiana state tax forms 2011 S Corporation Income or Loss An organization that owns S corporation stock must take into account its share of the S corporation's income, deductions, or losses in figuring unrelated business taxable income, regardless of the actual source or nature of the income, deductions, and losses. Indiana state tax forms 2011 For example, the organization's share of the S corporation's interest and dividend income will be taxable, even though interest and dividends are normally excluded from unrelated business taxable income. Indiana state tax forms 2011 The organization must also take into account its gain or loss on the sale or other disposition of the S corporation stock in figuring unrelated business taxable income. Indiana state tax forms 2011 Special Rules for Foreign Organizations The unrelated business taxable income of a foreign organization exempt from tax under section 501(a) consists of the organization's: Unrelated business taxable income derived from sources within the United States but not effectively connected with the conduct of a trade or business within the United States, and Unrelated business taxable income effectively connected with the conduct of a trade or business within the United States, whether or not this income is derived from sources within the United States. Indiana state tax forms 2011 To determine whether income realized by a foreign organization is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States, see sections 861 through 865 and the related regulations. Indiana state tax forms 2011 Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs The following discussion applies to: Social clubs described in section 501(c)(7), Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9), Supplemental unemployment compensation benefit trusts (SUBs) described in section 501(c)(17), and Group legal services organizations (GLSOs) described in section 501(c)(20). Indiana state tax forms 2011 These organizations must figure unrelated business taxable income under special rules. Indiana state tax forms 2011 Unlike other exempt organizations, they cannot exclude their investment income (dividends, interest, rents, etc. Indiana state tax forms 2011 ). Indiana state tax forms 2011 (See Exclusions under Income, earlier. Indiana state tax forms 2011 ) Therefore, they are generally subject to unrelated business income tax on this income. Indiana state tax forms 2011 The unrelated business taxable income of these organizations includes all gross income, less deductions directly connected with the production of that income, except that gross income for this purpose does not include exempt function income. Indiana state tax forms 2011 The dividends received by a corporation are not allowed in computing unrelated business taxable income because it is not an expense incurred in the production of income. Indiana state tax forms 2011 Losses from nonexempt activities. Indiana state tax forms 2011   Losses from nonexempt activities of these organizations cannot be used to offset investment income unless the activities were undertaken with the intent to make a profit. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 A private golf and country club that is a qualified tax-exempt social club has nonexempt function income from interest and from the sale of food and beverages to nonmembers. Indiana state tax forms 2011 The club sells food and beverages as a service to members and their guests rather than for the purpose of making a profit. Indiana state tax forms 2011 Therefore, any loss resulting from sales to nonmembers cannot be used to offset the club's interest income. Indiana state tax forms 2011 Modifications. Indiana state tax forms 2011   The unrelated business taxable income is modified by any NOL or charitable contributions deduction and by the specific deduction (described earlier under Deductions). Indiana state tax forms 2011 Exempt function income. Indiana state tax forms 2011   This is gross income from dues, fees, charges or similar items paid by members for goods, facilities, or services to the members or their dependents or guests, to further the organization's exempt purposes. Indiana state tax forms 2011 Exempt function income also includes income set aside for qualified purposes. Indiana state tax forms 2011 Income that is set aside. Indiana state tax forms 2011   This is income set aside to be used for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Indiana state tax forms 2011 In addition, for a VEBA, SUB, or GLSO, it is income set aside to provide for the payment of life, sick, accident, or other benefits. Indiana state tax forms 2011   However, any amounts set aside by a VEBA or SUB that exceed the organization's qualified asset account limit (determined under section 419A) are unrelated business income. Indiana state tax forms 2011 Special rules apply to the treatment of existing reserves for post-retirement medical or life insurance benefits. Indiana state tax forms 2011 These rules are explained in section 512(a)(3)(E)(ii). Indiana state tax forms 2011   Income derived from an unrelated trade or business may not be set aside and therefore cannot be exempt function income. Indiana state tax forms 2011 In addition, any income set aside and later spent for other purposes must be included in unrelated business taxable income. Indiana state tax forms 2011   Set-aside income is generally excluded from gross income only if it is set aside in the tax year in which it is otherwise includible in gross income. Indiana state tax forms 2011 However, income set aside on or before the date for filing Form 990-T, including extensions of time, may, at the election of the organization, be treated as having been set aside in the tax year for which the return was filed. Indiana state tax forms 2011 The income set aside must have been includible in gross income for that earlier year. Indiana state tax forms 2011 Nonrecognition of gain. Indiana state tax forms 2011   If the organization sells property used directly in performing an exempt function and purchases other property used directly in performing an exempt function, any gain on the sale is recognized only to the extent that the sales price of the old property exceeds the cost of the new property. Indiana state tax forms 2011 The purchase of the new property must be made within 1 year before the date of sale of the old property or within 3 years after the date of sale. Indiana state tax forms 2011   This rule also applies to gain from an involuntary conversion of the property resulting from its destruction in whole or in part, theft, seizure, requisition, or condemnation. Indiana state tax forms 2011 Special Rules for Veterans' Organizations Unrelated business taxable income of a veterans' organization that is exempt under section 501(c)(19) does not include the net income from insurance business that is properly set aside. Indiana state tax forms 2011 The organization may set aside income from payments received for life, sick, accident, or health insurance for the organization's members or their dependents for the payment of insurance benefits or reasonable costs of insurance administration, or for use exclusively for religious, charitable, scientific, literary, or educational purposes, or the prevention of cruelty to children or animals. Indiana state tax forms 2011 For details, see section 512(a)(4) and the regulations under that section. Indiana state tax forms 2011 Income From Controlled Organizations The exclusions for interest, annuities, royalties, and rents, explained earlier in this chapter under Income, may not apply to a payment of these items received by a controlling organization from its controlled organization. Indiana state tax forms 2011 The payment is included in the controlling organization's unrelated business taxable income to the extent it reduced the net unrelated income (or increased the net unrelated loss) of the controlled organization. Indiana state tax forms 2011 All deductions of the controlling organization directly connected with the amount included in its unrelated business taxable income are allowed. Indiana state tax forms 2011 Excess qualifying specified payments. Indiana state tax forms 2011   Excess qualifying specified payments received or accrued from a controlled entity are included in a controlling exempt organization's unrelated business taxable income only on the amount that exceeds that which would have been paid or accrued if the payments had been determined under section 482. Indiana state tax forms 2011 Qualifying specified payments means any payments of interest, annuities, royalties, or rents received or accrued from the controlled organization pursuant to a binding written contract in effect on August 17, 2006, or to a contract which is a renewal, under substantially similar terms of a binding written contract in effect on August 17, 2006, and the payments are received or accrued before January 1, 2012. Indiana state tax forms 2011   If a controlled participant is not required to file a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 income tax return, the participant must ensure that the copy or copies of the Regulations section 1. Indiana state tax forms 2011 482-7 Cost Sharing Arrangement Statement and any updates are attached to Schedule M of any Form 5471, Information Return of U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Persons With Respect To Certain Foreign Corporations, any Form 5472, Information Return of a 25% Foreign-Owned U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Corporation or a Foreign Corporation Engaged in a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Trade or Business, or any Form 8865, Return of U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Persons With Respect to Certain Foreign Partnerships, filed for that participant. Indiana state tax forms 2011 Addition to tax for valuation misstatements. Indiana state tax forms 2011   Under section 512(b)(13)(E)(ii), the tax imposed on a controlling organization will be increased by 20 percent of the excess qualifying specified payments that are determined with or without any amendments or supplements, whichever is larger. Indiana state tax forms 2011 See section 512(b)(13)(E)(ii) for more information. Indiana state tax forms 2011 Net unrelated income. Indiana state tax forms 2011   This is: For an exempt organization, its unrelated business taxable income, or For a nonexempt organization, the part of its taxable income that would be unrelated business taxable income if it were exempt and had the same exempt purposes as the controlling organization. Indiana state tax forms 2011 Net unrelated loss. Indiana state tax forms 2011   This is: For an exempt organization, its NOL, or For a nonexempt organization, the part of its NOL that would be its NOL if it were exempt and had the same exempt purposes as the controlling organization. Indiana state tax forms 2011 Control. Indiana state tax forms 2011   An organization is controlled if: For a corporation, the controlling organization owns (by vote or value) more than 50% of the stock, For a partnership, the controlling organization owns more than 50% of the profits or capital interests, or For any other organization, the controlling organization owns more than 50% of the beneficial interest. Indiana state tax forms 2011 For this purpose, constructive ownership of stock (determined under section 318) or other interests is taken into account. Indiana state tax forms 2011   As a result, an exempt parent organization is treated as controlling any subsidiary in which it holds more than 50% of the voting power or value, whether directly (as in the case of a first-tier subsidiary) or indirectly (as in the case of a second-tier subsidiary). Indiana state tax forms 2011 Income from property financed with qualified 501(c)(3) bonds. Indiana state tax forms 2011 If any part of a 501(c)(3) organization's property financed with qualified 501(c)(3) bonds is used in a trade or business of any person other than a section 501(c)(3) organization or a governmental unit, and such use is not consistent with the requirements for qualified 501(c)(3) bonds under section 145, the section 501(c)(3) organization is considered to have received unrelated business income in the amount of the greater of the actual rental income or the fair rental value of the property for the period it is used. Indiana state tax forms 2011 No deduction is allowed for interest on the private activity bond. Indiana state tax forms 2011 See sections 150(b)(3) and (c) for more information. Indiana state tax forms 2011 Disposition of property received from taxable subsidiary and used in unrelated business. Indiana state tax forms 2011 A taxable 80%-owned subsidiary corporation of one or more tax-exempt entities is generally subject to tax on a distribution in liquidation of its assets to its exempt parent (or parents). Indiana state tax forms 2011 The assets are treated as if sold at fair market value. Indiana state tax forms 2011 Tax-exempt entities include organizations described in sections 501(a), 529, and 115, charitable remainder trusts, U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 and foreign governments, Indian tribal governments, international organizations, and similar non-taxable organizations. Indiana state tax forms 2011 A taxable corporation that transfers substantially all of its assets to a tax-exempt entity in a transaction that otherwise qualifies for nonrecognition treatment must recognize gain on the transaction as if it sold the assets at fair market value. Indiana state tax forms 2011 However, such a transfer is not taxable if it qualifies as a like-kind exchange under section 1031 or an involuntary conversion under section 1033. Indiana state tax forms 2011 In such a case the built-in appreciation is preserved in the replacement property received in the transaction. Indiana state tax forms 2011 A corporation that changes status from taxable to tax-exempt is treated generally as if it transferred all of its assets to a tax-exempt entity immediately before the change in status (thus subjecting it to the tax on a deemed sale for fair market value). Indiana state tax forms 2011 This rule does not apply where the taxable corporation becomes exempt within 3 years of formation, or had previously been exempt and within several years (generally a period of 3 years) regains exemption, unless the principal purpose of the transactions is to avoid the tax on the change in status. Indiana state tax forms 2011 In the transactions described above, the taxable event is deferred for property that the tax-exempt entity immediately uses in an unrelated business. Indiana state tax forms 2011 If the parent later disposes of the property, then any gain (not in excess of the amount not recognized) is included in the parent's unrelated business taxable income. Indiana state tax forms 2011 If there is partial use of the assets in unrelated business, then there is partial recognition of gain or loss. Indiana state tax forms 2011 Property is treated as disposed if the tax-exempt entity no longer uses it in an unrelated business. Indiana state tax forms 2011 Losses on the transfer of assets to a tax-exempt entity are disallowed if part of a plan with a principal purpose of recognizing losses. Indiana state tax forms 2011 Income From Debt-Financed Property Investment income that would otherwise be excluded from an exempt organization's unrelated business taxable income (see Exclusions under Income earlier) must be included to the extent it is derived from debt-financed property. Indiana state tax forms 2011 The amount of income included is proportionate to the debt on the property. Indiana state tax forms 2011 Debt-Financed Property In general, the term “debt-financed property” means any property held to produce income (including gain from its disposition) for which there is an acquisition indebtedness at any time during the tax year (or during the 12-month period before the date of the property's disposal, if it was disposed of during the tax year). Indiana state tax forms 2011 It includes rental real estate, tangible personal property, and corporate stock. Indiana state tax forms 2011 Acquisition Indebtedness For any debt-financed property, acquisition indebtedness is the unpaid amount of debt incurred by an organization: When acquiring or improving the property, Before acquiring or improving the property if the debt would not have been incurred except for the acquisition or improvement, and After acquiring or improving the property if: The debt would not have been incurred except for the acquisition or improvement, and Incurring the debt was reasonably foreseeable when the property was acquired or improved. Indiana state tax forms 2011 The facts and circumstances of each situation determine whether incurring a debt was reasonably foreseeable. Indiana state tax forms 2011 That an organization may not have foreseen the need to incur a debt before acquiring or improving the property does not necessarily mean that incurring the debt later was not reasonably foreseeable. Indiana state tax forms 2011 Example 1. Indiana state tax forms 2011 Y, an exempt scientific organization, mortgages its laboratory to replace working capital used in remodeling an office building that Y rents to an insurance company for nonexempt purposes. Indiana state tax forms 2011 The debt is acquisition indebtedness since the debt, though incurred after the improvement of the office building, would not have been incurred without the improvement, and the debt was reasonably foreseeable when, to make the improvement, Y reduced its working capital below the amount necessary to continue current operations. Indiana state tax forms 2011 Example 2. Indiana state tax forms 2011 X, an exempt organization, forms a partnership with A and B. Indiana state tax forms 2011 The partnership agreement provides that all three partners will share equally in the profits of the partnership, each will invest $3 million, and X will be a limited partner. Indiana state tax forms 2011 X invests $1 million of its own funds in the partnership and $2 million of borrowed funds. Indiana state tax forms 2011 The partnership buys as its sole asset an office building that it leases to the public for nonexempt purposes. Indiana state tax forms 2011 The office building costs the partnership $24 million, of which $15 million is borrowed from Y bank. Indiana state tax forms 2011 The loan is secured by a mortgage on the entire office building. Indiana state tax forms 2011 By agreement with Y bank, X is not personally liable for payment of the mortgage. Indiana state tax forms 2011 X has acquisition indebtedness of $7 million. Indiana state tax forms 2011 This amount is the $2 million debt X incurred in acquiring the partnership interest, plus the $5 million that is X's allocable part of the partnership's debt incurred to buy the office building (one-third of $15 million). Indiana state tax forms 2011 Example 3. Indiana state tax forms 2011 A labor union advanced funds, from existing resources and without any borrowing, to its tax-exempt subsidiary title-holding company. Indiana state tax forms 2011 The subsidiary used the funds to pay a debt owed to a third party that was previously incurred in acquiring two income-producing office buildings. Indiana state tax forms 2011 Neither the union nor the subsidiary has incurred any further debt in acquiring or improving the property. Indiana state tax forms 2011 The union has no outstanding debt on the property. Indiana state tax forms 2011 The subsidiary's debt to the union is represented by a demand note on which the subsidiary makes payments whenever it has the available cash. Indiana state tax forms 2011 The books of the union and the subsidiary list the outstanding debt as interorganizational indebtedness. Indiana state tax forms 2011 Although the subsidiary's books show a debt to the union, it is not the type subject to the debt-financed property rules. Indiana state tax forms 2011 In this situation, the very nature of the title-holding company and the parent-subsidiary relationship shows this debt to be merely a matter of accounting between the two organizations. Indiana state tax forms 2011 Accordingly, the debt is not acquisition indebtedness. Indiana state tax forms 2011 Change in use of property. Indiana state tax forms 2011   If an organization converts property that is not debt-financed property to a use that results in its treatment as debt-financed property, the outstanding principal debt on the property is thereafter treated as acquisition indebtedness. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 Four years ago a university borrowed funds to acquire an apartment building as housing for married students. Indiana state tax forms 2011 Last year, the university rented the apartment building to the public for nonexempt purposes. Indiana state tax forms 2011 The outstanding principal debt becomes acquisition indebtedness as of the time the building was first rented to the public. Indiana state tax forms 2011 Continued debt. Indiana state tax forms 2011   If an organization sells property and, without paying off debt that would be acquisition indebtedness if the property were debt-financed property, buys property that is otherwise debt-financed property, the unpaid debt is acquisition indebtedness for the new property. Indiana state tax forms 2011 This is true even if the original property was not debt-financed property. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 To house its administration offices, an exempt organization bought a building using $600,000 of its own funds and $400,000 of borrowed funds secured by a pledge of its securities. Indiana state tax forms 2011 The office building was not debt-financed property. Indiana state tax forms 2011 The organization later sold the building for $1 million without repaying the $400,000 loan. Indiana state tax forms 2011 It used the sale proceeds to buy an apartment building it rents to the general public. Indiana state tax forms 2011 The unpaid debt of $400,000 is acquisition indebtedness with respect to the apartment building. Indiana state tax forms 2011 Property acquired subject to mortgage or lien. Indiana state tax forms 2011   If property (other than certain gifts, bequests, and devises) is acquired subject to a mortgage, the outstanding principal debt secured by that mortgage is treated as acquisition indebtedness even if the organization did not assume or agree to pay the debt. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 An exempt organization paid $50,000 for real property valued at $150,000 and subject to a $100,000 mortgage. Indiana state tax forms 2011 The $100,000 of outstanding principal debt is acquisition indebtedness, as though the organization had borrowed $100,000 to buy the property. Indiana state tax forms 2011 Liens similar to a mortgage. Indiana state tax forms 2011   In determining acquisition indebtedness, a lien similar to a mortgage is treated as a mortgage. Indiana state tax forms 2011 A lien is similar to a mortgage if title to property is encumbered by the lien for a creditor's benefit. Indiana state tax forms 2011 However, when state law provides that a lien for taxes or assessments attaches to property before the taxes or assessments become due and payable, the lien is not treated as a mortgage until after the taxes or assessments have become due and payable and the organization has had an opportunity to pay the lien in accordance with state law. Indiana state tax forms 2011 Liens similar to mortgages include (but are not limited to): Deeds of trust, Conditional sales contracts, Chattel mortgages, Security interests under the Uniform Commercial Code, Pledges, Agreements to hold title in escrow, and Liens for taxes or assessments (other than those discussed earlier in this paragraph). Indiana state tax forms 2011 Exception for property acquired by gift, bequest, or devise. Indiana state tax forms 2011   If property subject to a mortgage is acquired by gift, bequest, or devise, the outstanding principal debt secured by the mortgage is not treated as acquisition indebtedness during the 10-year period following the date the organization receives the property. Indiana state tax forms 2011 However, this applies to a gift of property only if:    The mortgage was placed on the property more than 5 years before the date the organization received it, and The donor held the property for more than 5 years before the date the organization received it. Indiana state tax forms 2011   This exception does not apply if an organization assumes and agrees to pay all or part of the debt secured by the mortgage or makes any payment for the equity in the property owned by the donor or decedent (other than a payment under an annuity obligation excluded from the definition of acquisition indebtedness, discussed under Debt That Is Not Acquisition Indebtedness, later). Indiana state tax forms 2011   Whether an organization has assumed and agreed to pay all or part of a debt in order to acquire the property is determined by the facts and circumstances of each situation. Indiana state tax forms 2011 Modifying existing debt. Indiana state tax forms 2011   Extending, renewing, or refinancing an existing debt is considered a continuation of that debt to the extent its outstanding principal does not increase. Indiana state tax forms 2011 When the principal of the modified debt is more than the outstanding principal of the old debt, the excess is treated as a separate debt. Indiana state tax forms 2011 Extension or renewal. Indiana state tax forms 2011   In general, any modification or substitution of the terms of a debt by an organization is considered an extension or renewal of the original debt, rather than the start of a new one, to the extent that the outstanding principal of the debt does not increase. Indiana state tax forms 2011   The following are examples of acts resulting in the extension or renewal of a debt: Substituting liens to secure the debt, Substituting obligees whether or not with the organization's consent, Renewing, extending, or accelerating the payment terms of the debt, and Adding, deleting, or substituting sureties or other primary or secondary obligors. Indiana state tax forms 2011 Debt increase. Indiana state tax forms 2011   If the outstanding principal of a modified debt is more than that of the unmodified debt, and only part of the refinanced debt is acquisition indebtedness, the payments on the refinanced debt must be allocated between the old debt and the excess. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 An organization has an outstanding principal debt of $500,000 that is treated as acquisition indebtedness. Indiana state tax forms 2011 The organization borrows another $100,000, which is not acquisition indebtedness, from the same lender, resulting in a $600,000 note for the total obligation. Indiana state tax forms 2011 A payment of $60,000 on the total obligation would reduce the acquisition indebtedness by $50,000 ($60,000 x $500,000/$600,000) and the excess debt by $10,000. Indiana state tax forms 2011 Debt That Is Not Acquisition Indebtedness Certain debt and obligations are not acquisition indebtedness. Indiana state tax forms 2011 These include the following. Indiana state tax forms 2011 Debts incurred in performing an exempt purpose. Indiana state tax forms 2011 Annuity obligations. Indiana state tax forms 2011 Securities loans. Indiana state tax forms 2011 Real property debts of qualified organizations. Indiana state tax forms 2011 Certain Federal financing. Indiana state tax forms 2011 Debt incurred in performing exempt purpose. Indiana state tax forms 2011   A debt incurred in performing an exempt purpose is not acquisition indebtedness. Indiana state tax forms 2011 For example, acquisition indebtedness does not include the debt an exempt credit union incurs in accepting deposits from its members or the debt an exempt organization incurs in accepting payments from its members to provide them with insurance, retirement, or other benefits. Indiana state tax forms 2011 Annuity obligation. Indiana state tax forms 2011   The organization's obligation to pay an annuity is not acquisition indebtedness if the annuity meets all the following requirements. Indiana state tax forms 2011 It must be the sole consideration (other than a mortgage on property acquired by gift, bequest, or devise that meets the exception discussed under Property acquired subject to mortgage or lien, earlier in this chapter) issued in exchange for the property received. Indiana state tax forms 2011 Its present value, at the time of exchange, must be less than 90% of the value of the prior owner's equity in the property received. Indiana state tax forms 2011 It must be payable over the lives of either one or two individuals living when issued. Indiana state tax forms 2011 It must be payable under a contract that: Does not guarantee a minimum nor specify a maximum number of payments, and Does not provide for any adjustment of the amount of the annuity payments based on the income received from the transferred property or any other property. Indiana state tax forms 2011 Example. Indiana state tax forms 2011 X, an exempt organization, receives property valued at $100,000 from donor A, a male age 60. Indiana state tax forms 2011 In return X promises to pay A $6,000 a year for the rest of A's life, with neither a minimum nor maximum number of payments specified. Indiana state tax forms 2011 The amounts paid under the annuity are not dependent on the income derived from the property transferred to X. Indiana state tax forms 2011 The present value of this annuity is $81,156, determined from IRS valuation tables. Indiana state tax forms 2011 Since the value of the annuity is less than 90 percent of A's $100,000 equity in the property transferred and the annuity meets all the other requirements just discussed, the obligation to make annuity payments is not acquisition indebtedness. Indiana state tax forms 2011 Securities loans. Indiana state tax forms 2011   Acquisition indebtedness does not include an obligation of the exempt organization to return collateral security provided by the borrower of the exempt organization's securities under a securities loan agreement (discussed under Exclusions earlier in this chapter). Indiana state tax forms 2011 This transaction is not treated as the borrowing by the exempt organization of the collateral furnished by the borrower (usually a broker) of the securities. Indiana state tax forms 2011   However, if the exempt organization incurred debt to buy the loaned securities, any income from the securities (including income from
Print - Click this link to Print this page

Understanding your CP22A Notice

We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully ― it will explain why you owe money on your taxes.
  • Pay the amount owed by the date on the notice's payment coupon.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us if you disagree with the change(s) we made.
  • Correct the copy of your tax return that you kept for your records.

You may want to...


Answers to Common Questions

The notice says "Based on the information you provided, we changed your 200X Form 1040 to correct your:..." but I don't remember sending any change to IRS. How can I find out what IRS received to initiate this change?
Please contact us at the number listed on the top right corner of your notice for specific information about your tax return.

What do I say when I call the IRS?
Mention that you got a CP22A notice with a balance due and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll-free number listed on the top right corner of your notice.

What happens if I can't pay the full amount I owe?
You can arrange to make a payment plan with us if you can't pay the full amount you owe.

Am I charged interest on the money I owe?
If you don't full pay the amount you owe by the date on the payment coupon, interest will accrue on the unpaid balance after that date.

Will I receive a penalty if I can't pay the full amount?
Yes, you'll receive a late payment penalty. You can contact us at the number listed on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

Can I set up a payment plan?
Yes. Call the toll-free number listed on the top right corner of your notice to discuss payment options or check out more information on payment options and how to make a payment arrangement.

There are other options, such as paying by credit card. Note: There may be a fee to pay by credit card.

What if I need to make another correction to my account?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.

What if I have tried to get answers and after contacting IRS several times have not been successful?
Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059.

What if I think I’m a victim of identity theft?
Please contact us at the number listed on the top right corner of your notice. Refer to the IRS Identity Theft resource page for more information.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 03-Mar-2014

The Indiana State Tax Forms 2011

Indiana state tax forms 2011 Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Indiana state tax forms 2011 Adjustment for premium. Indiana state tax forms 2011 Adjustment for acquisition premium. Indiana state tax forms 2011 Adjustment for market discount. Indiana state tax forms 2011 Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Indiana state tax forms 2011 “Original issue discount” is defined first. Indiana state tax forms 2011 The other terms are listed alphabetically. Indiana state tax forms 2011 Original issue discount (OID). Indiana state tax forms 2011   OID is a form of interest. Indiana state tax forms 2011 It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Indiana state tax forms 2011 Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Indiana state tax forms 2011 Accrual period. Indiana state tax forms 2011   An accrual period is an interval of time used to measure OID. Indiana state tax forms 2011 The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Indiana state tax forms 2011 Acquisition premium. Indiana state tax forms 2011   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Indiana state tax forms 2011 A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Indiana state tax forms 2011 See Premium, later. Indiana state tax forms 2011 Adjusted issue price. Indiana state tax forms 2011   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Indiana state tax forms 2011 In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Indiana state tax forms 2011 The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Indiana state tax forms 2011 Debt instrument. Indiana state tax forms 2011   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Indiana state tax forms 2011 It generally does not include an annuity contract. Indiana state tax forms 2011 Issue price. Indiana state tax forms 2011   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Indiana state tax forms 2011 Market discount. Indiana state tax forms 2011   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Indiana state tax forms 2011 An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Indiana state tax forms 2011 The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Indiana state tax forms 2011 Premium. Indiana state tax forms 2011   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Indiana state tax forms 2011 The premium is the excess of the adjusted basis over the payable amounts. Indiana state tax forms 2011 See Publication 550 for information on the tax treatment of bond premium. Indiana state tax forms 2011 Qualified stated interest. Indiana state tax forms 2011   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Indiana state tax forms 2011 Stated redemption price at maturity. Indiana state tax forms 2011   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Indiana state tax forms 2011 Yield to maturity (YTM). Indiana state tax forms 2011   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Indiana state tax forms 2011 The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Indiana state tax forms 2011 If you do not have this information, consult your broker, tax advisor, or the issuer. Indiana state tax forms 2011 Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Indiana state tax forms 2011 If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Indiana state tax forms 2011 The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Indiana state tax forms 2011 For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Indiana state tax forms 2011 The following discussions explain what information is contained in each section of the list. Indiana state tax forms 2011 Section I. Indiana state tax forms 2011   This section contains publicly offered, long-term debt instruments. Indiana state tax forms 2011 Section I-A: Corporate Debt Instruments Issued Before 1985. Indiana state tax forms 2011 Section I-B: Corporate Debt Instruments Issued After 1984. Indiana state tax forms 2011 Section I-C: Inflation-Indexed Debt Instruments. Indiana state tax forms 2011 For each publicly offered debt instrument in Section I, the list contains the following information. Indiana state tax forms 2011 The name of the issuer. Indiana state tax forms 2011 The Committee on Uniform Security Identification Procedures (CUSIP) number. Indiana state tax forms 2011 The issue date. Indiana state tax forms 2011 The maturity date. Indiana state tax forms 2011 The issue price expressed as a percent of principal or of stated redemption price at maturity. Indiana state tax forms 2011 The annual stated or coupon interest rate. Indiana state tax forms 2011 (This rate is shown as 0. Indiana state tax forms 2011 00 if no annual interest payments are provided. Indiana state tax forms 2011 ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Indiana state tax forms 2011 The total OID accrued up to January 1 of a calendar year. Indiana state tax forms 2011 (This information is not available for every instrument. Indiana state tax forms 2011 ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Indiana state tax forms 2011 The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Indiana state tax forms 2011 Section II. Indiana state tax forms 2011   This section contains stripped coupons and principal components of U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury and Government-Sponsored Enterprise debt instruments. Indiana state tax forms 2011 These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Indiana state tax forms 2011 This section also includes debt instruments backed by U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury securities that represent ownership interests in those securities. Indiana state tax forms 2011   The obligations listed in Section II are arranged by maturity date. Indiana state tax forms 2011 The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Indiana state tax forms 2011 Section III. Indiana state tax forms 2011   This section contains short-term discount obligations. Indiana state tax forms 2011 Section III-A: Short-Term U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury Bills. Indiana state tax forms 2011 Section III-B: Federal Home Loan Banks. Indiana state tax forms 2011 Section III-C: Federal National Mortgage Association. Indiana state tax forms 2011 Section III-D: Federal Farm Credit Banks. Indiana state tax forms 2011 Section III-E: Federal Home Loan Mortgage Corporation. Indiana state tax forms 2011 Section III-F: Federal Agricultural Mortgage Corporation. Indiana state tax forms 2011    Information that supplements Section III-A is available on the Internet at http://www. Indiana state tax forms 2011 treasurydirect. Indiana state tax forms 2011 gov/tdhome. Indiana state tax forms 2011 htm. Indiana state tax forms 2011   The short-term obligations listed in this section are arranged by maturity date. Indiana state tax forms 2011 For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Indiana state tax forms 2011 Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Indiana state tax forms 2011 Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Indiana state tax forms 2011 U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 savings bonds. Indiana state tax forms 2011 Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Indiana state tax forms 2011 Obligations issued by tax-exempt organizations. Indiana state tax forms 2011 OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Indiana state tax forms 2011 Mortgage-backed securities and mortgage participation certificates. Indiana state tax forms 2011 Long-term OID debt instruments issued before May 28, 1969. Indiana state tax forms 2011 Short-term obligations, other than the obligations listed in Section III. Indiana state tax forms 2011 Debt instruments issued at a discount by states or their political subdivisions. Indiana state tax forms 2011 REMIC regular interests and CDOs. Indiana state tax forms 2011 Commercial paper and banker's acceptances issued at a discount. Indiana state tax forms 2011 Obligations issued at a discount by individuals. Indiana state tax forms 2011 Foreign obligations not traded in the United States and obligations not issued in the United States. Indiana state tax forms 2011 Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Indiana state tax forms 2011 In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Indiana state tax forms 2011 You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Indiana state tax forms 2011 See Backup Withholding, later. Indiana state tax forms 2011 If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Indiana state tax forms 2011 File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Indiana state tax forms 2011 Electronic payee statements. Indiana state tax forms 2011   You can issue Form 1099-OID electronically with the consent of the recipient. Indiana state tax forms 2011 More information. Indiana state tax forms 2011   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Indiana state tax forms 2011 Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Indiana state tax forms 2011 To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Indiana state tax forms 2011 If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Indiana state tax forms 2011 Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Indiana state tax forms 2011 If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Indiana state tax forms 2011 A special rule is used to determine the original issue price for information reporting on U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury bills (T-bills) listed in Section III-A. Indiana state tax forms 2011 Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Indiana state tax forms 2011 This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Indiana state tax forms 2011 A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Indiana state tax forms 2011 Example 1. Indiana state tax forms 2011 There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Indiana state tax forms 2011 The price actually paid by the owner cannot be established by owner or middleman records. Indiana state tax forms 2011 You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Indiana state tax forms 2011 The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Indiana state tax forms 2011 Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Indiana state tax forms 2011 For this purpose, you can rely on Section I of the OID list to determine the following information. Indiana state tax forms 2011 Whether a debt instrument has OID. Indiana state tax forms 2011 The OID to be reported on the Form 1099-OID. Indiana state tax forms 2011 In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Indiana state tax forms 2011 You also can report OID on other long-term debt instruments. Indiana state tax forms 2011 Form 1099-OID. Indiana state tax forms 2011   On Form 1099-OID for a calendar year show the following information. Indiana state tax forms 2011 Box 1. Indiana state tax forms 2011 The OID for the actual dates the owner held the debt instruments during a calendar year. Indiana state tax forms 2011 To determine this amount, see Figuring OID, next. Indiana state tax forms 2011 Box 2. Indiana state tax forms 2011 The qualified stated interest paid or credited during the calendar year. Indiana state tax forms 2011 Interest reported here is not reported on Form 1099-INT. Indiana state tax forms 2011 The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Indiana state tax forms 2011 Box 3. Indiana state tax forms 2011 Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Indiana state tax forms 2011 Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Indiana state tax forms 2011 Box 4. Indiana state tax forms 2011 Any backup withholding for this debt instrument. Indiana state tax forms 2011 Box 7. Indiana state tax forms 2011 The CUSIP number, if any. Indiana state tax forms 2011 If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Indiana state tax forms 2011 50 2006). Indiana state tax forms 2011 If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Indiana state tax forms 2011 Box 8. Indiana state tax forms 2011 The OID on a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury obligation for the part of the year the owner held the debt instrument. Indiana state tax forms 2011 Box 9. Indiana state tax forms 2011 Investment expenses passed on to holders of a single-class REMIC. Indiana state tax forms 2011 Boxes 10-12. Indiana state tax forms 2011 Use to report any state income tax withheld for this debt instrument. Indiana state tax forms 2011 Figuring OID. Indiana state tax forms 2011   You can determine the OID on a long-term debt instrument by using either of the following. Indiana state tax forms 2011 Section I of the OID list. Indiana state tax forms 2011 The income tax regulations. Indiana state tax forms 2011 Using Section I. Indiana state tax forms 2011   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Indiana state tax forms 2011 Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Indiana state tax forms 2011 For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Indiana state tax forms 2011   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Indiana state tax forms 2011 Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Indiana state tax forms 2011 Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Indiana state tax forms 2011 Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Indiana state tax forms 2011 Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Indiana state tax forms 2011 If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Indiana state tax forms 2011 Report the result on Form 1099-OID in box 1. Indiana state tax forms 2011 Using the income tax regulations. Indiana state tax forms 2011   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Indiana state tax forms 2011 For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Indiana state tax forms 2011 (If you use Section I-B, the OID is figured using 6-month accrual periods. Indiana state tax forms 2011 )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Indiana state tax forms 2011 Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Indiana state tax forms 2011 You must file an information return showing the reportable interest and OID, if any, on the CD. Indiana state tax forms 2011 These rules apply whether or not you sold the CD to the owner. Indiana state tax forms 2011 Report OID on a CD in the same way as OID on other debt instruments. Indiana state tax forms 2011 See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Indiana state tax forms 2011 Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Indiana state tax forms 2011 However, do not report the interest if either of the following apply. Indiana state tax forms 2011 You hold the bond as a nominee for the true owner. Indiana state tax forms 2011 The payee is a foreign person. Indiana state tax forms 2011 See Payments to foreign person under Backup Withholding, later. Indiana state tax forms 2011 Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Indiana state tax forms 2011 The coupon may have been “stripped” (separated) from the bond and separately purchased. Indiana state tax forms 2011 However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Indiana state tax forms 2011 Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Indiana state tax forms 2011 The backup withholding is deducted at the time a cash payment is made. Indiana state tax forms 2011 See Pub. Indiana state tax forms 2011 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Indiana state tax forms 2011 Backup withholding generally applies in the following situations. Indiana state tax forms 2011 The payee does not give you a taxpayer identification number (TIN). Indiana state tax forms 2011 The IRS notifies you that the payee gave an incorrect TIN. Indiana state tax forms 2011 The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Indiana state tax forms 2011 For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Indiana state tax forms 2011 However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Indiana state tax forms 2011 Short-term obligations. Indiana state tax forms 2011   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Indiana state tax forms 2011 However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Indiana state tax forms 2011   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Indiana state tax forms 2011 However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Indiana state tax forms 2011 If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Indiana state tax forms 2011 Long-term obligations. Indiana state tax forms 2011   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Indiana state tax forms 2011 The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Indiana state tax forms 2011 The amount to be withheld is limited to the cash paid. Indiana state tax forms 2011 Registered long-term obligations with cash payments. Indiana state tax forms 2011   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Indiana state tax forms 2011 The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Indiana state tax forms 2011 If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Indiana state tax forms 2011 For any payment, the required withholding is limited to the cash paid. Indiana state tax forms 2011 Payee not the original owner. Indiana state tax forms 2011   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Indiana state tax forms 2011 The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Indiana state tax forms 2011 Bearer long-term obligations with cash payments. Indiana state tax forms 2011   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Indiana state tax forms 2011 For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Indiana state tax forms 2011 For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Indiana state tax forms 2011 The required withholding at maturity is limited to the cash paid. Indiana state tax forms 2011 Sales and redemptions. Indiana state tax forms 2011   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Indiana state tax forms 2011 Backup withholding applies in the following situations. Indiana state tax forms 2011 The payee does not give you a TIN. Indiana state tax forms 2011 The IRS notifies you that the payee gave an incorrect TIN. Indiana state tax forms 2011 For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Indiana state tax forms 2011 Payments outside the United States to U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 person. Indiana state tax forms 2011   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 trade or business. Indiana state tax forms 2011 Payments to foreign person. Indiana state tax forms 2011   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Indiana state tax forms 2011 U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 -source amount. Indiana state tax forms 2011   Backup withholding and information reporting are not required for payments of U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Indiana state tax forms 2011 A U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 resident is not a foreign person. Indiana state tax forms 2011 For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Indiana state tax forms 2011 Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 person. Indiana state tax forms 2011   For information about the 28% withholding tax that may apply to payments of U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 -source OID or interest to foreign persons, see Publication 515. Indiana state tax forms 2011 Foreign-source amount. Indiana state tax forms 2011   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Indiana state tax forms 2011 However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Indiana state tax forms 2011 More information. Indiana state tax forms 2011   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Indiana state tax forms 2011 6049-5. Indiana state tax forms 2011 Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Indiana state tax forms 2011 It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Indiana state tax forms 2011 It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Indiana state tax forms 2011 However, the information provided does not cover every situation. Indiana state tax forms 2011 More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Indiana state tax forms 2011 Including OID in income. Indiana state tax forms 2011   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Indiana state tax forms 2011 Exceptions. Indiana state tax forms 2011   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Indiana state tax forms 2011 U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 savings bonds. Indiana state tax forms 2011 Tax-exempt obligations. Indiana state tax forms 2011 (However, see Tax-Exempt Bonds and Coupons, later. Indiana state tax forms 2011 ) Obligations issued by individuals before March 2, 1984. Indiana state tax forms 2011 Loans of $10,000 or less between individuals who are not in the business of lending money. Indiana state tax forms 2011 (The dollar limit includes outstanding prior loans by the lender to the borrower. Indiana state tax forms 2011 ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Indiana state tax forms 2011   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Indiana state tax forms 2011 Publication 550 also discusses rules for holders of REMIC interests and CDOs. Indiana state tax forms 2011 De minimis rule. Indiana state tax forms 2011   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Indiana state tax forms 2011 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Indiana state tax forms 2011 Debt instruments with de minimis OID are not listed in this publication. Indiana state tax forms 2011 There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Indiana state tax forms 2011 Also, the de minimis rules generally do not apply to tax-exempt obligations. Indiana state tax forms 2011 Example 2. Indiana state tax forms 2011 You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Indiana state tax forms 2011 One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Indiana state tax forms 2011 Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Indiana state tax forms 2011 Example 3. Indiana state tax forms 2011 Assume the same facts as Example 2, except the debt instrument was issued at $950. Indiana state tax forms 2011 You must report part of the $50 OID each year because it is more than $25. Indiana state tax forms 2011 Choice to report all interest as OID. Indiana state tax forms 2011   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Indiana state tax forms 2011 See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Indiana state tax forms 2011   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Indiana state tax forms 2011 For more information, see Regulations section 1. Indiana state tax forms 2011 1272-3. Indiana state tax forms 2011 Purchase after date of original issue. Indiana state tax forms 2011   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Indiana state tax forms 2011 If so, the OID reported to you on Form 1099-OID may have to be adjusted. Indiana state tax forms 2011 For more information, see Showing an OID adjustment under How To Report OID, later. Indiana state tax forms 2011 The following rules generally do not apply to contingent payment debt instruments. Indiana state tax forms 2011 Adjustment for premium. Indiana state tax forms 2011   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Indiana state tax forms 2011 Your adjustment is the total OID shown on your Form 1099-OID. Indiana state tax forms 2011 Adjustment for acquisition premium. Indiana state tax forms 2011   If your debt instrument has acquisition premium, reduce the OID you report. Indiana state tax forms 2011 Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Indiana state tax forms 2011 Adjustment for market discount. Indiana state tax forms 2011   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Indiana state tax forms 2011 Your adjustment is the accrued market discount for the year. Indiana state tax forms 2011 See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Indiana state tax forms 2011 If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Indiana state tax forms 2011 The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Indiana state tax forms 2011 For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Indiana state tax forms 2011 1275-7. Indiana state tax forms 2011 Sale, exchange, or redemption. Indiana state tax forms 2011   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Indiana state tax forms 2011 If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Indiana state tax forms 2011 Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Indiana state tax forms 2011   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Indiana state tax forms 2011 Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Indiana state tax forms 2011 In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Indiana state tax forms 2011   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Indiana state tax forms 2011 Example 4. Indiana state tax forms 2011 Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Indiana state tax forms 2011 00 on November 1 of Year 1. Indiana state tax forms 2011 The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Indiana state tax forms 2011 The debt instrument provides for semiannual payments of interest at 10%. Indiana state tax forms 2011 Assume the debt instrument is a capital asset in Larry's hands. Indiana state tax forms 2011 The debt instrument has $13,765. Indiana state tax forms 2011 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Indiana state tax forms 2011 00 issue price). Indiana state tax forms 2011 Larry sold the debt instrument for $90,000 on November 1 of Year 4. Indiana state tax forms 2011 Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Indiana state tax forms 2011 00 of OID in income and has increased his basis by that amount to $90,791. Indiana state tax forms 2011 00. Indiana state tax forms 2011 Larry has realized a loss of $791. Indiana state tax forms 2011 00. Indiana state tax forms 2011 All of Larry's loss is capital loss. Indiana state tax forms 2011 Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Indiana state tax forms 2011 Form 1099-OID shows all OID income in box 1 except OID on a U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury obligation, which is shown in box 8. Indiana state tax forms 2011 It also shows, in box 2, any qualified stated interest you must include in income. Indiana state tax forms 2011 (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Indiana state tax forms 2011 ) A copy of Form 1099-OID will be sent to the IRS. Indiana state tax forms 2011 Do not attach your copy to your tax return. Indiana state tax forms 2011 Keep it for your records. Indiana state tax forms 2011 If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Indiana state tax forms 2011 A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Indiana state tax forms 2011 Form 1099-OID not received. Indiana state tax forms 2011   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Indiana state tax forms 2011 Refiguring OID. Indiana state tax forms 2011   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Indiana state tax forms 2011 You bought the debt instrument at a premium or at an acquisition premium. Indiana state tax forms 2011 The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury securities). Indiana state tax forms 2011 The debt instrument is a contingent payment or inflation-indexed debt instrument. Indiana state tax forms 2011 See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Indiana state tax forms 2011 Refiguring interest. Indiana state tax forms 2011   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Indiana state tax forms 2011 Nominee. Indiana state tax forms 2011   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Indiana state tax forms 2011 ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Indiana state tax forms 2011 Show the owner of the debt instrument as the “recipient” and you as the “payer. Indiana state tax forms 2011 ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Indiana state tax forms 2011 You must also give a copy of the Form 1099-OID to the actual owner. Indiana state tax forms 2011 However, you are not required to file a nominee return to show amounts belonging to your spouse. Indiana state tax forms 2011 See the Form 1099 instructions for more information. Indiana state tax forms 2011   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Indiana state tax forms 2011 How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Indiana state tax forms 2011 Form 1040 or Form 1040A required. Indiana state tax forms 2011   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Indiana state tax forms 2011 You received a Form 1099-OID as a nominee for the actual owner. Indiana state tax forms 2011 Your total interest and OID income for the year was more than $1,500. Indiana state tax forms 2011 Form 1040 required. Indiana state tax forms 2011   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Indiana state tax forms 2011 For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Indiana state tax forms 2011 Also, you must use Form 1040 if you were charged an early withdrawal penalty. Indiana state tax forms 2011 Where to report. Indiana state tax forms 2011   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Indiana state tax forms 2011 Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Indiana state tax forms 2011 Also include any other OID and interest income for which you did not receive a Form 1099. Indiana state tax forms 2011 Showing an OID adjustment. Indiana state tax forms 2011   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Indiana state tax forms 2011   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Indiana state tax forms 2011 If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Indiana state tax forms 2011 Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Indiana state tax forms 2011 Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Indiana state tax forms 2011 Subtract that OID from the subtotal and enter the result on line 2. Indiana state tax forms 2011 If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Indiana state tax forms 2011 Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Indiana state tax forms 2011 Below the subtotal, write “OID Adjustment” and show the additional OID. Indiana state tax forms 2011 Add that OID to the subtotal and enter the result on line 2. Indiana state tax forms 2011 Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Indiana state tax forms 2011 It also may depend on the type of the debt instrument. Indiana state tax forms 2011 There are different rules for each of the following debt instruments. Indiana state tax forms 2011 Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Indiana state tax forms 2011 Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Indiana state tax forms 2011 Debt instruments issued after July 1, 1982, and before 1985. Indiana state tax forms 2011 Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Indiana state tax forms 2011 Contingent payment debt instruments issued after August 12, 1996. Indiana state tax forms 2011 Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Indiana state tax forms 2011 Zero coupon bonds. Indiana state tax forms 2011   The rules for figuring OID on zero coupon bonds backed by U. Indiana state tax forms 2011 S. Indiana state tax forms 2011 Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Indiana state tax forms 2011 Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Indiana state tax forms 2011 The OID, which is taxed as ordinary income, generally equals the following amount. Indiana state tax forms 2011   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Indiana state tax forms 2011 If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Indiana state tax forms 2011 Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Indiana state tax forms 2011 For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Indiana state tax forms 2011 Your basis in the debt instrument is increased by the OID you include in income. Indiana state tax forms 2011 Form 1099-OID. Indiana state tax forms 2011   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Indiana state tax forms 2011 However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Indiana state tax forms 2011 See Reduction for acquisition premium, later. Indiana state tax forms 2011 If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Indiana state tax forms 2011 irs. Indiana state tax forms 2011 gov/pub1212 by clicking the link under Recent Developments. Indiana state tax forms 2011 Form 1099-OID not received. Indiana state tax forms 2011    The OID listed is for each $1,000 of redemption price. Indiana state tax forms 2011 You must adjust the listed amount if your debt instrument has a different principal amount. Indiana state tax forms 2011 For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Indiana state tax forms 2011   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Indiana state tax forms 2011 (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Indiana state tax forms 2011 ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Indiana state tax forms 2011 Divide the OID shown by 12. Indiana state tax forms 2011 Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Indiana state tax forms 2011 This is the OID to include in income unless you paid an acquisition premium. Indiana state tax forms 2011 The reduction for acquisition premium is discussed next. Indiana state tax forms 2011 Reduction for acquisition premium. Indiana state tax forms 2011   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Indiana state tax forms 2011 Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Indiana state tax forms 2011 This is the monthly OID. Indiana state tax forms 2011 Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Indiana state tax forms 2011 (If the result is zero or less, stop here. Indiana state tax forms 2011 You did not pay an acquisition premium. Indiana state tax forms 2011 ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Indiana state tax forms 2011 Subtract the amount figured in (3) from the amount figured in (1). Indiana state tax forms 2011 This is the OID to include in income for each month you hold the debt instrument during the year. Indiana state tax forms 2011 Transfers during the month. Indiana state tax forms 2011   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Indiana state tax forms 2011 Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Indiana state tax forms 2011 Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Indiana state tax forms 2011 For information about showing the correct OID on your tax return, see How To Report OID, earlier. Indiana state tax forms 2011 Form 1099-OID. Indiana state tax forms 2011   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Indiana state tax forms 2011 However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Indiana state tax forms 2011 See Constant yield method and the discussions on acquisition premium that follow, later. Indiana state tax forms 2011 If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Indiana state tax forms 2011 irs. Indiana state tax forms 2011 gov/pub1212 by clicking the link under Recent Developments. Indiana state tax forms 2011 Form 1099-OID not received. Indiana state tax forms 2011    The OID listed is for each $1,000 of redemption price. Indiana state tax forms 2011 You must adjust the listed amount if your debt instrument has a different principal amount. Indiana state tax forms 2011 For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Indiana state tax forms 2011   If you held the debt instrument the entire year, use the OID shown in Section I-A. Indiana state tax forms 2011 (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Indiana state tax forms 2011 ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Indiana state tax forms 2011 Method 1. Indiana state tax forms 2011    Divide the total OID for a calendar year by 365 (366 for leap years). Indiana state tax forms 2011 Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Indiana state tax forms 2011  This computation is an approximation and may result in a slightly higher OID than Method 2. Indiana state tax forms 2011 Method 2. Indiana state tax forms 2011    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Indiana state tax forms 2011 (See Accrual period under Constant yield method, next. Indiana state tax forms 2011 ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Indiana state tax forms 2011 If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Indiana state tax forms 2011 Add the results of (2) and (3). Indiana state tax forms 2011 This is the OID to include in income, unless you paid an acquisition premium. Indiana state tax forms 2011 (The reduction for acquisition premium is discussed later. Indiana state tax forms 2011 ) Constant yield method. Indiana state tax forms 2011   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Indiana state tax forms 2011 OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Indiana state tax forms 2011   Figure the OID allocable to any accrual period as follows. Indiana state tax forms 2011 Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Indiana state tax forms 2011 Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Indiana state tax forms 2011 Accrual period. Indiana state tax forms 2011   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Indiana state tax forms 2011 Your tax year will usually include parts of two accrual periods. Indiana state tax forms 2011 Daily OID. Indiana state tax forms 2011   The OID for any accrual period is allocated equally to each day in the accrual period. Indiana state tax forms 2011 You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Indiana state tax forms 2011 If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Indiana state tax forms 2011 Figuring daily OID. Indiana state tax forms 2011   The daily OID for the initial accrual period is figured using the following formula. Indiana state tax forms 2011   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Indiana state tax forms 2011 Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Indiana state tax forms 2011   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Indiana state tax forms 2011 Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Indiana state tax forms 2011 Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Indiana state tax forms 2011   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Indiana state tax forms 2011 However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Indiana state tax forms 2011 To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Indiana state tax forms 2011 The numerator is the acquisition premium. Indiana state tax forms 2011 The denominator is the total OID remaining for the debt instrument after your purchase date. Indiana state tax forms 2011 Section I-A is available at www. Indiana state tax forms 2011 irs. Indiana state tax forms 2011 gov/pub1212 and clicking the link under Recent Developments. Indiana state tax forms 2011 Using Section I-A to figure accumulated OID. Indiana state tax forms 2011   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Indiana state tax forms 2011 The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Indiana state tax forms 2011 The OID from January 1 of a calendar year to the date of purchase, figured as follows. Indiana state tax forms 2011 Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Indiana state tax forms 2011 Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Indiana state tax forms 2011 Add the amounts figured in (2a) and (2b). Indiana state tax forms 2011 Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Indiana state tax forms 2011 You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Indiana state tax forms 2011 Your basis in the debt instrument is increased by the OID you include in income. Indiana state tax forms 2011 For information about showing the correct OID on your tax return, see How To Report OID, earlier. Indiana state tax forms 2011 Form 1099-OID. Indiana state tax forms 2011   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Indiana state tax forms 2011 However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Indiana state tax forms 2011 See Constant yield method and Reduction for acquisition premium, later. Indiana state tax forms 2011   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Indiana state tax forms 2011 See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Indiana state tax forms 2011 If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Indiana state tax forms 2011 irs. Indiana state tax forms 2011 gov/pub1212 by clicking the link under Recent Developments. Indiana state tax forms 2011 Form 1099-OID not received. Indiana state tax forms 2011   The OID listed is for each $1,000 of redemption price. Indiana state tax forms 2011 You must adjust the listed amount if your debt instrument has a different principal amount. Indiana state tax forms 2011 For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Indiana state tax forms 2011   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Indiana state tax forms 2011 (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Indiana state tax forms 2011 ) If you did not hold the debt instrument the entire year, figure your OID as follows. Indiana state tax forms 2011 Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Indiana state tax forms 2011 (See Accrual period under Constant yield method, later. Indiana state tax forms 2011 ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Indiana state tax forms 2011 Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Indiana state tax forms 2011 Add the results of (2) and (3). Indiana state tax forms 2011 This is the OID to include in income for that year, unless you paid an acquisition premium. Indiana state tax forms 2011 (The reduction for acquisition premium is discussed later. Indiana state tax forms 2011 ) Tax-exempt bond. Indiana state tax forms 2011   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Indiana state tax forms 2011 You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Indiana state tax forms 2011 In general, use the rules that follow to determine your OID. Indiana state tax forms 2011 Constant yield method. Indiana state tax forms 2011   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Indiana state tax forms 2011 (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Indiana state tax forms 2011 ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Indiana state tax forms 2011   Figure the OID allocable to any accrual period as follows. Indiana state tax forms 2011 Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Indiana state tax forms 2011 The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Indiana state tax forms 2011 The yield must be stated appropriately taking into account the length of the particular accrual period. Indiana state tax forms 2011 Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Indiana state tax forms 2011 Accrual period. Indiana state tax forms 2011   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Indiana state tax forms 2011 For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Indiana state tax forms 2011 Any short period is included as the first accrual period. Indiana state tax forms 2011   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Indiana state tax forms 2011 However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Indiana state tax forms 2011 Daily OID. Indiana state tax forms 2011   The OID for any accrual period is allocated equally to each day in the accrual period. Indiana state tax forms 2011 Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Indiana state tax forms 2011 Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Indiana state tax forms 2011 If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Indiana state tax forms 2011 Figuring daily OID. Indiana state tax forms 2011   The daily OID for the initial accrual period is figured using the following formula. Indiana state tax forms 2011   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Indiana state tax forms 2011 Example 5. Indiana state tax forms 2011 On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Indiana state tax forms 2011 17. Indiana state tax forms 2011 According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Indiana state tax forms 2011 The yield to maturity is 12%, compounded semiannually. Indiana state tax forms 2011 The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Indiana state tax forms 2011 The accrual periods are the 6-month periods ending on each of these dates. Indiana state tax forms 2011 The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Indiana state tax forms 2011 The daily OID for the first accrual period is figured as follows. Indiana state tax forms 2011   ($86,235. Indiana state tax forms 2011 17 x . Indiana state tax forms 2011 12/2) – $5,000     181 days     = $174. Indiana state tax forms 2011 11020 = $. Indiana state tax forms 2011 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Indiana state tax forms 2011 17 + $174. Indiana state tax forms 2011 11), or $86,409. Indiana state tax forms 2011 28. Indiana state tax forms 2011 The number of days for the second accrual period (July 1 through December 31) is 184 days. Indiana state tax forms 2011 The daily OID for the second accrual period is figured as follows. Indiana state tax forms 2011   ($86,409. Indiana state tax forms 2011 28 x . Indiana state tax forms 2011 12/2) – $5,000     184 days     = $184. Indiana state tax forms 2011 55681 = $1. Indiana state tax forms 2011 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Indiana state tax forms 2011 11 ($. Indiana state tax forms 2011 95665 × 182 days) plus $184. Indiana state tax forms 2011 56 ($1. Indiana state tax forms 2011 00303 × 184 days), or $358. Indiana state tax forms 2011 67. Indiana state tax forms 2011 Add the OID to the $10,000 interest you report on your income tax return for Year 1. Indiana state tax forms 2011 Example 6. Indiana state tax forms 2011 Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Indiana state tax forms 2011 Also, the interest payment dates are October 31 and April 30 of each calendar year. Indiana state tax forms 2011 The accrual periods are the 6-month periods ending on each of these dates. Indiana state tax forms 2011 The number of days for the first accrual period (May 1 through October 31) is 184 days. Indiana state tax forms 2011 The daily OID for the first accrual period is figured as follows. Indiana state tax forms 2011   ($86,235. Indiana state tax forms 2011 17 x . Indiana state tax forms 2011 12/2) – $5,000     184 days     = $174. Indiana state tax forms 2011 11020 = $. Indiana state tax forms 2011 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Indiana state tax forms 2011 The daily OID for the second accrual period is figured as follows. Indiana state tax forms 2011   ($86,409. Indiana state tax forms 2011 28 x . Indiana state tax forms 2011 12/2) – $5,000     181 days     = $184. Indiana state tax forms 2011 55681 = $1. Indiana state tax forms 2011 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Indiana state tax forms 2011 31 of OID in income. Indiana state tax forms 2011 This is $174. Indiana state tax forms 2011 11 ($. Indiana state tax forms 2011 94625 × 184 days) for the period May 1 through October 31 plus $62. Indiana state tax forms 2011 20 ($1. Indiana state tax forms 2011 01965 × 61 days) for the period November 1 through December 31. Indiana state tax forms 2011 The OID is added to the $5,000 interest income paid on October 31 of Year 1. Indiana state tax forms 2011 Your basis in the debt instrument is increased by the OID you include in income. Indiana state tax forms 2011 On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Indiana state tax forms 2011 48 ($86,235. Indiana state tax forms 2011 17 + $236. Indiana state tax forms 2011 31). Indiana state tax forms 2011 Short first accrual period. Indiana state tax forms 2011   You may have to make adjustments if a debt instrument has a short first accrual period. Indiana state tax forms 2011 For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Indiana state tax forms 2011 (The remaining accrual periods begin on May 1 and November 1. Indiana state tax forms 2011 ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Indiana state tax forms 2011 You may use any reasonable compounding method in determining OID for a short period. Indiana state tax forms 2011 Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Indiana state tax forms 2011 Consult your tax advisor for more information about making this computation. Indiana state tax forms 2011   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Indiana state tax forms 2011 Reduction for acquisition premium. Indiana state tax forms 2011   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Indiana state tax forms 2011 To figure the daily acquisition premium, multiply the daily OID by the following fraction. Indiana state tax forms 2011 The numerator is the acquisition premium. Indiana state tax forms 2011 The denominator is the total OID remaining for the debt instrument after your purchase date. Indiana state tax forms 2011 Example 7. Indiana state tax forms 2011 Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Indiana state tax forms 2011 The adjusted issue price on November 1 of Year 1 is $86,409. Indiana state tax forms 2011 28 ($86,235. Indiana state tax forms 2011 17 + $174. Indiana state tax forms 2011 11). Indiana state tax forms 2011 In this case, you paid an acquisition premium of $590. Indiana state tax forms 2011 72 ($87,000 − $86,409. Indiana state tax forms 2011 28). Indiana state tax forms 2011 The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Indiana state tax forms 2011 1) Daily OID on date of purchase (2nd accrual period) $1. Indiana state tax forms 2011 01965*  2)  Acquisition premium $590. Indiana state tax forms 2011 72    3)  Total OID remaining after purchase date ($13,764. Indiana state tax forms 2011 83 − $174. Indiana state tax forms 2011 11) 13,590. Indiana state tax forms 2011 72   4) Line 2 ÷ line 3 . Indiana state tax forms 2011 04346  5)  Line 1 × line 4 . Indiana state tax forms 2011 04432  6)  Daily OID reduced for the acquisition premium. Indiana state tax forms 2011 Line 1 − line 5 $0. Indiana state tax forms 2011 97533  * As shown in Example 6. Indiana state tax forms 2011 The total OID to include in income for Year 1 is $59. Indiana state tax forms 2011 50 ($. Indiana state tax forms 2011 97533 × 61 days). Indiana state tax forms 2011 Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Indiana state tax forms 2011 In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Indiana state tax forms 2011 If you hold a contingent payment bond, you must report OID as it accrues each year. Indiana state tax forms 2011 Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Indiana state tax forms 2011 To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Indiana state tax forms 2011 Noncontingent bond method. Indiana state tax forms 2011    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Indiana state tax forms 2011 In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Indiana state tax forms 2011 When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Indiana state tax forms 2011 If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Indiana state tax forms 2011 If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Indiana state tax forms 2011 Form 1099-OID. Indiana state tax forms 2011   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Indiana state tax forms 2011 For example, the amount may not be correct if the contingent payment was different from the projected amount. Indiana state tax forms 2011 If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Indiana state tax forms 2011 For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Indiana state tax forms 2011 Figuring OID. Indiana state tax forms 2011   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Indiana state tax forms 2011 The issuer must make these available to you. Indiana state tax forms 2011 Comparable yield. Indiana state tax forms 2011   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Indiana state tax forms 2011 The comparable yield is determined as of the debt instrument's issue date. Indiana state tax forms 2011 Projected payment schedule. Indiana state tax forms 2011   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Indiana state tax forms 2011 The projected payment schedule is created by the issuer as of the debt instrument's issue date. Indiana state tax forms 2011 It is used to determine the issuer's and holder's interest accruals and adjustments. Indiana state tax forms 2011 Steps for figuring OID. Indiana state tax forms 2011   Figure the OID on a contingent payment debt instrument in two steps. Indiana state tax forms 2011 Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Indiana state tax forms 2011 Use the comparable yield as the yield to maturity. Indiana state tax forms 2011 In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Indiana state tax forms 2011 Do not treat any amount payable as qualified stated interest. Indiana state tax forms 2011 Adjust the OID in (1) to account for actual contingent payments. Indiana state tax forms 2011 If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Indiana state tax forms 2011 If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Indiana state tax forms 2011 Net positive adjustment. Indiana state tax forms 2011   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Indiana state tax forms 2011 Treat a net positive adjustment as additional OID for the tax year. Indiana state tax forms 2011 Net negative adjustment. Indiana state tax forms 2011   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Indiana state tax forms 2011 Use a net negative adjustment to offset OID on the debt instrument for the tax year. Indiana state tax forms 2011 If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Indiana state tax forms 2011 However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Indiana state tax forms 2011 You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Indiana state tax forms 2011 Basis adjustments. Indiana state tax forms 2011   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Indiana state tax forms 2011 Your basis, however, is not affected by any negative or positive adjustments. Indiana state tax forms 2011 Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Indiana state tax forms 2011 Treatment of gain or loss on sale or exchange. Indiana state tax forms 2011   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Indiana state tax forms 2011 If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Indiana state tax forms 2011 If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Indiana state tax forms 2011 See Regulations section 1. Indiana state tax forms 2011 1275-4 for exceptions to these rules. Indiana state tax forms 2011 Premium, acquisition premium, and market discount. Indiana state tax forms 2011   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Indiana state tax forms 2011 See Regulations section 1. Indiana state tax forms 2011 1275-4 to determine how to account for these items. Indiana state tax forms 2011 Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Indiana state tax forms 2011 An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d