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Instructions For Filing An Amended Tax Return

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Instructions For Filing An Amended Tax Return

Instructions for filing an amended tax return Publication 4492-B - Main Content Table of Contents DefinitionsMidwestern Disaster Areas Applicable Disaster Date Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Casualty and Theft LossesTime limit for making election. Instructions for filing an amended tax return Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesEmployee Retention Credit Employer Housing Credit and Exclusion Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Instructions for filing an amended tax return Definitions The following definitions are used throughout this publication. Instructions for filing an amended tax return Midwestern Disaster Areas A Midwestern disaster area is an area for which a major disaster was declared by the President during the period beginning on May 20, 2008, and ending on July 31, 2008, in the state of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, or Wisconsin, as a result of severe storms, tornadoes, or flooding that occurred on the applicable disaster date. Instructions for filing an amended tax return See Tables 1 and 2 for a list of the counties included in the Midwestern disaster areas. Instructions for filing an amended tax return Applicable Disaster Date The term “applicable disaster date” as used in this publication, refers to the date on which the severe storms, tornadoes, or flooding occurred in the Midwestern disaster areas. Instructions for filing an amended tax return You will need to know this date when using this publication for the various tax provisions. Instructions for filing an amended tax return Table 1 The counties listed in Table 1 below are eligible for all tax provisions shown in this publication. Instructions for filing an amended tax return Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 05/02/2008through05/12/2008 Arkansas Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline, and Van Buren. Instructions for filing an amended tax return 06/01/2008through07/22/2008 Illinois Adams, Calhoun, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Jersey, Lake, Lawrence, Mercer, Rock Island, Whiteside, and Winnebago. Instructions for filing an amended tax return 05/30/2008through06/27/2008 Indiana Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Hendricks, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Madison, Marion, Monroe, Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Tippecanoe, Vermillion, Vigo, Washington, and Wayne. Instructions for filing an amended tax return 05/25/2008through08/13/2008 Iowa Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cass, Cedar, Cerro Gordo, Chickasaw, Clarke, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Iowa, Jackson, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Polk, Pottawattamie, Poweshiek, Ringgold, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winnebago, Winneshiek, Worth, and Wright. Instructions for filing an amended tax return 05/10/2008through05/11/2008 Missouri Barry, Jasper, and Newton. Instructions for filing an amended tax return 06/01/2008through08/13/2008 Missouri Adair, Andrew, Callaway, Cass, Chariton, Clark, Gentry, Greene, Harrison, Holt, Johnson, Lewis, Lincoln, Linn, Livingston, Macon, Marion, Monroe, Nodaway, Pike, Putnam, Ralls, St. Instructions for filing an amended tax return Charles, Stone, Taney, Vernon, and Webster. Instructions for filing an amended tax return 05/22/2008through06/24/2008 Nebraska Buffalo, Butler, Colfax, Custer, Dawson, Douglas, Gage, Hamilton, Holt, Jefferson, Kearney, Lancaster, Platte, Richardson, Sarpy, and Saunders. Instructions for filing an amended tax return 06/05/2008through07/25/2008 Wisconsin Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Manitowoc, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha, and Winnebago. Instructions for filing an amended tax return *For more details, go to www. Instructions for filing an amended tax return fema. Instructions for filing an amended tax return gov Table 2 The counties listed in Table 2 below are eligible for all of the special tax provisions shown in this publication except the following. Instructions for filing an amended tax return Charitable Giving Incentives. Instructions for filing an amended tax return Net Operating Losses. Instructions for filing an amended tax return Education Credits. Instructions for filing an amended tax return Recapture of Federal Mortgage Subsidy. Instructions for filing an amended tax return Tax Relief for Temporary Relocation. Instructions for filing an amended tax return Employee Retention Credit. Instructions for filing an amended tax return Employer Housing Credit and Exclusion. Instructions for filing an amended tax return Demolition and Clean-up Costs. Instructions for filing an amended tax return Increase in Rehabilitation Credit. Instructions for filing an amended tax return Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 06/01/2008through07/22/2008 Illinois Greene, Madison, Monroe, Pike, Randolph, St. Instructions for filing an amended tax return Clair, and Scott. Instructions for filing an amended tax return 05/30/2008through06/27/2008 Indiana Benton, Boone, Fountain, Franklin, Jay, Montgomery, Ohio, Switzerland, Union, and Wabash. Instructions for filing an amended tax return 05/25/2008through08/13/2008 Iowa Carroll, Cherokee, Lyon, Palo Alto, Pocahontas, Taylor, and Wayne. Instructions for filing an amended tax return 05/22/2008through06/16/2008 Kansas Barber, Barton, Bourbon, Brown, Butler, Chautauqua, Cherokee, Clark, Clay, Comanche, Cowley, Crawford, Decatur, Dickinson, Edwards, Elk, Ellis, Ellsworth, Franklin, Gove, Graham, Harper, Haskell, Hodgeman, Jackson, Jewell, Kingman, Kiowa, Lane, Linn, Logan, Mitchell, Montgomery, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Reno, Republic, Riley, Rooks, Rush, Saline, Seward, Sheridan, Smith, Stafford, Sumner, Thomas, Trego, Wallace, and Wilson. Instructions for filing an amended tax return 06/06/2008through06/13/2008 Michigan Allegan, Barry, Eaton, Ingham, Lake, Manistee, Mason, Missaukee, Osceola, Ottawa, Saginaw, and Wexford. Instructions for filing an amended tax return 06/06/2008through06/12/2008 Minnesota Cook, Fillmore, Freeborn, Houston, Mower, and Nobles. Instructions for filing an amended tax return 06/01/2008through08/13/2008 Missouri Atchison, Audrain, Bates, Buchanan, Cape Girardeau, Carroll, Christian, Daviess, Grundy, Howard, Jefferson, Knox, Mercer, Miller, Mississippi, Morgan, New Madrid, Pemiscot, Perry, Pettis, Platte, Polk, Randolph, Ray, Saline, Schuyler, Scotland, Shelby, St. Instructions for filing an amended tax return Genevieve, St. Instructions for filing an amended tax return Louis, the Independent City of St. Instructions for filing an amended tax return Louis, Scott, Sullivan, and Worth. Instructions for filing an amended tax return 04/23/2008through04/26/2008 Nebraska Gage, Johnson, Morrill, Nemaha, and Pawnee. Instructions for filing an amended tax return 05/22/2008through06/24/2008 Nebraska Adams, Blaine, Boone, Boyd, Brown, Burt, Cass, Chase, Cherry, Cuming, Dundy, Fillmore, Frontier, Furnas, Garfield, Gosper, Greeley, Hall, Hayes, Howard, Johnson, Keya Paha, Lincoln, Logan, Loup, Merrick, McPherson, Morrill, Nance, Nemaha, Otoe, Phelps, Polk, Red Willow, Rock, Saline, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Webster, Wheeler, and York. Instructions for filing an amended tax return 06/27/2008 Nebraska Dodge, Douglas, Sarpy, and Saunders. Instructions for filing an amended tax return 06/05/2008through07/25/2008 Wisconsin Lafayette. Instructions for filing an amended tax return * For more details, go to www. Instructions for filing an amended tax return fema. Instructions for filing an amended tax return gov Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return Individuals. Instructions for filing an amended tax return   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% of adjusted gross income (AGI) limit. Instructions for filing an amended tax return A qualified contribution is a charitable contribution paid in cash or by check to a 50% limit organization if you make an election to have the 50% limit not apply to these contributions. Instructions for filing an amended tax return   A qualified contribution must also meet all of the following requirements. Instructions for filing an amended tax return Be paid after May 1, 2008, and before January 1, 2009. Instructions for filing an amended tax return The contribution must be for relief efforts in one or more Midwestern disaster areas. Instructions for filing an amended tax return Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. Instructions for filing an amended tax return   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. Instructions for filing an amended tax return You can carry over any contributions you are not able to deduct for 2008 because of this limit. Instructions for filing an amended tax return In 2009, the carryover of your unused qualified contributions is subject to the 50% of AGI limit. Instructions for filing an amended tax return Exception. Instructions for filing an amended tax return   Qualified contributions do not include contributions to certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund. Instructions for filing an amended tax return Corporations. Instructions for filing an amended tax return   A corporation can elect to deduct qualified cash contributions without regard to the 10% of taxable income limit if the contributions were paid after May 1, 2008, and before January 1, 2009, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund), for relief efforts in one or more Midwestern disaster areas. Instructions for filing an amended tax return Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. Instructions for filing an amended tax return The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Instructions for filing an amended tax return Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% of taxable income limit. Instructions for filing an amended tax return Partners and shareholders. Instructions for filing an amended tax return   Each partner in a partnership and each shareholder in an S corporation must make a separate election to have the appropriate limit not apply. Instructions for filing an amended tax return More information. Instructions for filing an amended tax return   For more information, see Publication 526 or Publication 542, Corporations. Instructions for filing an amended tax return Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. Instructions for filing an amended tax return Standard Mileage Rate for Charitable Use of Vehicles This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return The following are special standard mileage rates in effect for 2008 for the cost of operating your vehicle for providing charitable services related only to the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return 36 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. Instructions for filing an amended tax return 41 cents per mile for the period July 1 through December 31, 2008. Instructions for filing an amended tax return Mileage Reimbursements to Charitable Volunteers This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger vehicle for the benefit of a qualified charitable organization in providing relief related to the severe storms, tornadoes, or flooding during the period beginning on the applicable disaster date, and ending on December 31, 2008. Instructions for filing an amended tax return You cannot claim a deduction or credit for amounts you exclude. Instructions for filing an amended tax return You must keep records of miles driven, time, place (or use), and purpose of the mileage. Instructions for filing an amended tax return The amount you can exclude cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. Instructions for filing an amended tax return 50. Instructions for filing an amended tax return 5 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. Instructions for filing an amended tax return 58. Instructions for filing an amended tax return 5 cents per mile for the period July 1 through December 31, 2008. Instructions for filing an amended tax return Casualty and Theft Losses This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return The following paragraphs explain changes to casualty and theft losses that were caused by the severe storms, tornadoes, or flooding in the Midwestern disaster areas. Instructions for filing an amended tax return For more information, see Publication 547. Instructions for filing an amended tax return Limits on personal casualty or theft losses. Instructions for filing an amended tax return   Losses of personal use property that arose in a Midwestern disaster area on or after the applicable disaster date are not subject to the $100 or 10% of AGI limits. Instructions for filing an amended tax return Qualifying losses include losses from casualties and thefts that arose in a Midwestern disaster area that were attributable to the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return When completing Form 4684, do not include on line 17 any losses that arose in a Midwestern disaster area. Instructions for filing an amended tax return A loss arising in a Midwestern disaster area is not considered a loss attributable to a federally declared disaster for purposes of that line and cannot be added to your standard deduction. Instructions for filing an amended tax return When to deduct the loss. Instructions for filing an amended tax return   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. Instructions for filing an amended tax return However, you can elect to deduct losses caused by the severe storms, tornadoes, or flooding on your return for the prior year. Instructions for filing an amended tax return Special instructions for individuals who elect to claim a Midwestern disaster area casualty or theft loss for 2007. Instructions for filing an amended tax return   Individuals filing or amending their 2007 tax return for casualty or theft losses that were attributable to the severe storms, tornadoes, or flooding should: Enter “Midwestern Disaster Area” at the top of Form 1040 or Form 1040X, and Complete the 2008 version of Form 4684. Instructions for filing an amended tax return Cross out “2008” and enter “2007” at the top of Form 4684. Instructions for filing an amended tax return Time limit for making election. Instructions for filing an amended tax return   You must make this election to claim your casualty or theft loss in 2007 by the later of the following dates. Instructions for filing an amended tax return The due date (without extensions) for filing your 2008 income tax return. Instructions for filing an amended tax return The due date (with extensions) for filing your 2007 income tax return. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return If you are a calendar year individual taxpayer, you have until April 15, 2009, to amend your 2007 tax return to claim a casualty or theft loss that occurred during 2008. Instructions for filing an amended tax return Replacement Period for Nonrecognition of Gain This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Instructions for filing an amended tax return Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a federally declared disaster area). Instructions for filing an amended tax return However, for property that was involuntarily converted on or after the applicable disaster date, as a result of the severe storms, tornadoes, or flooding, a 5-year replacement period applies if substantially all of the use of the replacement property is in a Midwestern disaster area. Instructions for filing an amended tax return For more information, see the Instructions for Form 4684. Instructions for filing an amended tax return Net Operating Losses This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return Qualified disaster recovery assistance loss. Instructions for filing an amended tax return   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. Instructions for filing an amended tax return However, the portion of an NOL that is a qualified disaster recovery assistance loss can be carried back to the 5 tax years before the NOL year. Instructions for filing an amended tax return In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Instructions for filing an amended tax return   A qualified disaster recovery assistance loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified disaster recovery assistance casualty loss (as defined below), Moving expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the employment of an individual whose main home was in a Midwestern disaster area before the applicable disaster date, who was unable to remain in that home because of the severe storms, tornadoes, or flooding, and whose main job location (after the move) is in a Midwestern disaster area, Temporary housing expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, to house employees of the taxpayer whose main job location is in a Midwestern disaster area, Depreciation or amortization allowable for any qualified disaster recovery assistance property (even if you elected not to claim the special disaster recovery assistance depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred on or after the applicable disaster date, and before January 1, 2011, for any damage from the severe storms, tornadoes, or flooding to property located in a Midwestern disaster area. Instructions for filing an amended tax return Qualified disaster recovery assistance casualty loss. Instructions for filing an amended tax return   A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the severe storms, tornadoes, or flooding of property located in a Midwestern disaster area. Instructions for filing an amended tax return Any such loss taken into account in figuring your qualified disaster recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year. Instructions for filing an amended tax return More information. Instructions for filing an amended tax return   For more information on NOLs, see Publication 536 or Publication 542, Corporations. Instructions for filing an amended tax return IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Definitions Qualified disaster recovery assistance distribution. Instructions for filing an amended tax return   A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan if all of the following apply. Instructions for filing an amended tax return The distribution was made on or after the applicable disaster date and before January 1, 2010. Instructions for filing an amended tax return Your main home was located in a Midwestern disaster area on the applicable disaster date. Instructions for filing an amended tax return You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. Instructions for filing an amended tax return Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Instructions for filing an amended tax return   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss. Instructions for filing an amended tax return   The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. Instructions for filing an amended tax return If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you can allocate the $100,000 limit among the plans any way you choose. Instructions for filing an amended tax return   A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution. Instructions for filing an amended tax return Eligible retirement plan. Instructions for filing an amended tax return   An eligible retirement plan can be any of the following. Instructions for filing an amended tax return A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). Instructions for filing an amended tax return A qualified annuity plan. Instructions for filing an amended tax return A tax-sheltered annuity contract. Instructions for filing an amended tax return A governmental section 457 deferred compensation plan. Instructions for filing an amended tax return A traditional, SEP, SIMPLE, or Roth IRA. Instructions for filing an amended tax return Main home. Instructions for filing an amended tax return   Generally, your main home is the home where you live most of the time. Instructions for filing an amended tax return A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. Instructions for filing an amended tax return Taxation of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. Instructions for filing an amended tax return However, if you elect, you can include the entire distribution in your income in the year it was received. Instructions for filing an amended tax return Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). Instructions for filing an amended tax return However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions. Instructions for filing an amended tax return For more information, see Form 8930. Instructions for filing an amended tax return Repayment of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Instructions for filing an amended tax return Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. Instructions for filing an amended tax return However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay. Instructions for filing an amended tax return You have three years from the day after the date you received the distribution to make a repayment. Instructions for filing an amended tax return Amounts that are repaid are treated as a qualified rollover and are not included in income. Instructions for filing an amended tax return Also, a repayment of a qualified disaster recovery assistance distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. Instructions for filing an amended tax return See Form 8930 for more information on how to report repayments. Instructions for filing an amended tax return Exceptions. Instructions for filing an amended tax return   You cannot repay the following types of distributions. Instructions for filing an amended tax return Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse). Instructions for filing an amended tax return Required minimum distributions. Instructions for filing an amended tax return Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. Instructions for filing an amended tax return Repayment of Qualified Distributions for the Purchase or Construction of a Main Home This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return If you received a qualified distribution to purchase or construct a main home in a Midwestern disaster area, you can repay part or all of that distribution on or after the applicable disaster date, but no later than March 3, 2009, to an eligible retirement plan. Instructions for filing an amended tax return For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. Instructions for filing an amended tax return To be a qualified distribution, the distribution must meet all of the following requirements. Instructions for filing an amended tax return The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. Instructions for filing an amended tax return The distribution was received after the date that was 6 months before the day after the applicable disaster date. Instructions for filing an amended tax return The distribution was to be used to purchase or construct a main home in a Midwestern disaster area that was not purchased or constructed because of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Amounts that are repaid before March 4, 2009, are treated as a qualified rollover and are not included in income. Instructions for filing an amended tax return Also, a repayment of a qualified distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. Instructions for filing an amended tax return A qualified distribution not repaid before March 4, 2009, may be taxable for 2007 or 2008 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. Instructions for filing an amended tax return You must file Form 8930 if you received a qualified distribution that you repaid, in whole or in part, before March 4, 2009. Instructions for filing an amended tax return Loans From Qualified Plans This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return The following benefits are available to qualified individuals. Instructions for filing an amended tax return Increases to the limits for distributions treated as loans from employer plans. Instructions for filing an amended tax return A 1-year suspension for payments due on plan loans. Instructions for filing an amended tax return Qualified individual. Instructions for filing an amended tax return   You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Instructions for filing an amended tax return Limits on plan loans. Instructions for filing an amended tax return   The $50,000 limit for distributions treated as plan loans is increased to $100,000. Instructions for filing an amended tax return In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. Instructions for filing an amended tax return If your main home was located in a Midwestern disaster area, the higher limits apply only to loans received during the period beginning on October 3, 2008, and ending on December 31, 2009. Instructions for filing an amended tax return One-year suspension of loan payments. Instructions for filing an amended tax return   Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for 1 year by the plan administrator. Instructions for filing an amended tax return To qualify for the suspension, the due date for any loan payment must occur during the period beginning on the applicable disaster date and ending on December 31, 2009. Instructions for filing an amended tax return Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if: Your 2008 earned income is less than your 2007 earned income, and At least one of the following statements is true. Instructions for filing an amended tax return Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1. Instructions for filing an amended tax return Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Earned income. Instructions for filing an amended tax return    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. Instructions for filing an amended tax return If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. Instructions for filing an amended tax return Joint returns. Instructions for filing an amended tax return   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. Instructions for filing an amended tax return If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income. Instructions for filing an amended tax return Making the election. Instructions for filing an amended tax return   If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. Instructions for filing an amended tax return However, you can make the election for the additional child tax credit even if you do not take the EIC. Instructions for filing an amended tax return   Electing to use your 2007 earned income can increase or decrease your EIC. Instructions for filing an amended tax return Take the following steps to decide whether to make the election. Instructions for filing an amended tax return Figure your 2008 EIC using your 2007 earned income. Instructions for filing an amended tax return Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes. Instructions for filing an amended tax return Add the results of (1) and (2). Instructions for filing an amended tax return Figure your 2008 EIC using your 2008 earned income. Instructions for filing an amended tax return Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes. Instructions for filing an amended tax return Add the results of (4) and (5). Instructions for filing an amended tax return Compare the results of (3) and (6). Instructions for filing an amended tax return If (3) is larger than (6), it is to your benefit to make the election. Instructions for filing an amended tax return If (3) is equal to or smaller than (6), making the election will not help you. Instructions for filing an amended tax return   If you elect to use your 2007 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. Instructions for filing an amended tax return   If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. Instructions for filing an amended tax return Getting your 2007 tax return information. Instructions for filing an amended tax return   If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. Instructions for filing an amended tax return You can also get this information by visiting the IRS website at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov. Instructions for filing an amended tax return   If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. Instructions for filing an amended tax return See Request for Copy or Transcript of Tax Return on page 11. Instructions for filing an amended tax return Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return You can claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return The additional exemption amount is claimed on Form 8914. Instructions for filing an amended tax return You can claim an additional exemption amount only one time for a specific individual. Instructions for filing an amended tax return If you claimed an additional exemption amount for an individual in 2008, you cannot claim that amount again for the same individual in 2009. Instructions for filing an amended tax return The maximum additional exemption amount you can claim for all displaced individuals is $2,000. Instructions for filing an amended tax return Any additional exemption amount you claimed for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. Instructions for filing an amended tax return The $2,000 limit applies to a husband and wife, whether the husband and wife file joint returns or separate returns. Instructions for filing an amended tax return If married filing separately, the $2,000 can be divided in $500 increments between the spouses. Instructions for filing an amended tax return For example, if one spouse claims an additional exemption amount for one displaced individual, the other spouse, if otherwise eligible, can claim additional exemption amounts for three different displaced individuals. Instructions for filing an amended tax return If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. Instructions for filing an amended tax return In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). Instructions for filing an amended tax return To qualify as a displaced individual, the individual: Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. Instructions for filing an amended tax return If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. Instructions for filing an amended tax return You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. Instructions for filing an amended tax return You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. Instructions for filing an amended tax return Food, clothing, or personal items consumed or used by the displaced individual. Instructions for filing an amended tax return Reimbursement for the cost of any long distance telephone calls made by the displaced individual. Instructions for filing an amended tax return Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. Instructions for filing an amended tax return However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. Instructions for filing an amended tax return Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. Instructions for filing an amended tax return For more information, see Form 8914. Instructions for filing an amended tax return Education Credits This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. Instructions for filing an amended tax return The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. Instructions for filing an amended tax return The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%. Instructions for filing an amended tax return The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. Instructions for filing an amended tax return This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. Instructions for filing an amended tax return In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following. Instructions for filing an amended tax return Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Instructions for filing an amended tax return For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. Instructions for filing an amended tax return For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. Instructions for filing an amended tax return The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Instructions for filing an amended tax return The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Instructions for filing an amended tax return You will need to contact the eligible educational institution for qualified room and board costs. Instructions for filing an amended tax return For more information, see Form 8863. Instructions for filing an amended tax return See Form 8917 for the tuition and fees deduction. Instructions for filing an amended tax return Recapture of Federal Mortgage Subsidy This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Instructions for filing an amended tax return However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. Instructions for filing an amended tax return This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1. Instructions for filing an amended tax return Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. Instructions for filing an amended tax return Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. Instructions for filing an amended tax return If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Instructions for filing an amended tax return This relief does not apply to any debt secured by real property located outside a Midwestern disaster area. Instructions for filing an amended tax return You may also have to reduce certain tax attributes by the amount excluded. Instructions for filing an amended tax return For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Instructions for filing an amended tax return Tax Relief for Temporary Relocation This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. Instructions for filing an amended tax return The IRS has exercised this authority as follows. Instructions for filing an amended tax return In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return You can treat as a student an individual who enrolled in school before the applicable disaster date, and who is unable to attend classes because of the severe storms, tornadoes, or flooding, for each month of the enrollment period that individual is prevented by the severe storms, tornadoes, or flooding from attending school as planned. Instructions for filing an amended tax return Additional Tax Relief for Businesses Employee Retention Credit This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return An eligible employer who conducted an active trade or business in a Midwestern disaster area can claim the employee retention credit. Instructions for filing an amended tax return The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Instructions for filing an amended tax return Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Instructions for filing an amended tax return Use Form 5884-A to claim the credit. Instructions for filing an amended tax return Employers affected by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return   The following definitions apply to employers affected by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Eligible employer. Instructions for filing an amended tax return   For this purpose, an eligible employer is any employer who meets all of the following. Instructions for filing an amended tax return Employed an average of not more than 200 employees on business days during the tax year before the applicable disaster date. Instructions for filing an amended tax return Conducted an active trade or business on the applicable disaster date in a Midwestern disaster area. Instructions for filing an amended tax return Whose trade or business was inoperable on any day after the applicable disaster date and before January 1, 2009, because of the damage caused by the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Eligible employee. Instructions for filing an amended tax return   For this purpose, an eligible employee is an employee whose principal place of employment on the applicable disaster date with such eligible employer was in a Midwestern disaster area. Instructions for filing an amended tax return An employee is not an eligible employee for purposes of the severe storms, tornadoes, or flooding if the employee is treated as an eligible employee for the work opportunity credit. Instructions for filing an amended tax return Qualified wages. Instructions for filing an amended tax return   Qualified wages are wages (up to $6,000 per employee) you paid or incurred before January 1, 2009, for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable disaster, and ending on the date your trade or business resumed significant operations at that place. Instructions for filing an amended tax return In addition, the wages must have been paid or incurred after the applicable disaster date. Instructions for filing an amended tax return    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. Instructions for filing an amended tax return    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Instructions for filing an amended tax return Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Instructions for filing an amended tax return Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. Instructions for filing an amended tax return   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. Instructions for filing an amended tax return For a special rule that applies to railroad employees, see section 51(h)(1)(B). Instructions for filing an amended tax return   Qualified wages do not include the following. Instructions for filing an amended tax return Wages paid to your dependent or a related individual. Instructions for filing an amended tax return See section 51(i)(1). Instructions for filing an amended tax return Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. Instructions for filing an amended tax return Wages for services of replacement workers during a strike or lockout. Instructions for filing an amended tax return   For more information, see Form 5884-A. Instructions for filing an amended tax return Employer Housing Credit and Exclusion This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return An employer who conducted an active trade or business in a Midwestern disaster area can claim the employer housing credit. Instructions for filing an amended tax return The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from November 1, 2008, through May 1, 2009. Instructions for filing an amended tax return The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Instructions for filing an amended tax return Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Instructions for filing an amended tax return The employer must use Form 5884-A to claim the credit. Instructions for filing an amended tax return A qualified employee is an individual who had a main home in a Midwestern disaster area on the applicable disaster date, and who performs substantially all employment services in a Midwestern disaster area for the employer furnishing the lodging. Instructions for filing an amended tax return The employee cannot be your dependent or a related individual. Instructions for filing an amended tax return See section 51(i)(1). Instructions for filing an amended tax return For more information, see Form 5884-A. Instructions for filing an amended tax return Demolition and Clean-up Costs This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return You can elect to deduct 50% of any qualified disaster recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Instructions for filing an amended tax return Qualified disaster recovery assistance clean-up costs are any amounts paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the removal of debris from, or the demolition of structures on, real property located in a Midwestern disaster area that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. Instructions for filing an amended tax return Qualified disaster recovery assistance clean-up costs are limited to amounts necessary due to damage attributable to the severe storms, tornadoes, or flooding in the Midwestern disaster areas. Instructions for filing an amended tax return Increase in Rehabilitation Tax Credit This benefit applies only to the counties in Table 1. Instructions for filing an amended tax return The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred on or after the applicable disaster date, and before January 1, 2012, on buildings located in a Midwestern disaster area as follows. Instructions for filing an amended tax return For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. Instructions for filing an amended tax return For certified historic structures, the credit percentage is increased from 20% to 26%. Instructions for filing an amended tax return For more information, see Form 3468, Investment Credit. Instructions for filing an amended tax return Request for Copy or Transcript of Tax Return Request for copy of tax return. Instructions for filing an amended tax return   You can use Form 4506 to order a copy of your tax return. Instructions for filing an amended tax return Generally, there is a $57 fee for requesting each copy of a tax return. Instructions for filing an amended tax return If your main home, principal place of business, or tax records are located in a Midwestern disaster area, the fee will be waived if “Midwestern Disaster Area” is written in red across the top of the form when filed. Instructions for filing an amended tax return Request for transcript of tax return. Instructions for filing an amended tax return   You can use Form 4506-T to order a free transcript of your tax return. Instructions for filing an amended tax return A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. Instructions for filing an amended tax return You can also call 1-800-829-1040 to order a transcript. Instructions for filing an amended tax return How To Get Tax Help Special IRS assistance. Instructions for filing an amended tax return   The IRS is providing special help for those affected by the severe storms, tornadoes, or flooding, as well as survivors and personal representatives of the victims. Instructions for filing an amended tax return We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by recent federally declared disasters, or who have other tax issues related to the severe storms, tornadoes, or flooding. Instructions for filing an amended tax return Call 1-866-562-5227 Monday through FridayIn English–7 a. Instructions for filing an amended tax return m. Instructions for filing an amended tax return to 10 p. Instructions for filing an amended tax return m. Instructions for filing an amended tax return local timeIn Spanish–8 a. Instructions for filing an amended tax return m. Instructions for filing an amended tax return to 9:30 p. Instructions for filing an amended tax return m. Instructions for filing an amended tax return local time   The IRS website at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov has notices and other tax relief information. Instructions for filing an amended tax return Check it periodically for any new guidance. Instructions for filing an amended tax return You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Instructions for filing an amended tax return By selecting the method that is best for you, you will have quick and easy access to tax help. Instructions for filing an amended tax return Contacting your Taxpayer Advocate. Instructions for filing an amended tax return   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Instructions for filing an amended tax return Here are seven things every taxpayer should know about TAS: TAS is your voice at the IRS. Instructions for filing an amended tax return Our service is free, confidential, and tailored to meet your needs. Instructions for filing an amended tax return You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Instructions for filing an amended tax return TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Instructions for filing an amended tax return This includes businesses as well as individuals. Instructions for filing an amended tax return TAS employees know the IRS and how to navigate it. Instructions for filing an amended tax return We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Instructions for filing an amended tax return TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Instructions for filing an amended tax return You can call your local advocate, whose number is in your phone book, in Pub. Instructions for filing an amended tax return 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/advocate. Instructions for filing an amended tax return You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Instructions for filing an amended tax return You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Instructions for filing an amended tax return taxtoolkit. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov. Instructions for filing an amended tax return Low Income Taxpayer Clinics (LITCs). Instructions for filing an amended tax return   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Instructions for filing an amended tax return LITCs are independent from the IRS. Instructions for filing an amended tax return Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Instructions for filing an amended tax return If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Instructions for filing an amended tax return For more information, see Publication 4134, Low Income Taxpayer Clinic List. Instructions for filing an amended tax return This publication is available at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Instructions for filing an amended tax return Free tax services. Instructions for filing an amended tax return   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Instructions for filing an amended tax return It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. Instructions for filing an amended tax return It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone. Instructions for filing an amended tax return   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Instructions for filing an amended tax return Free help with your return. Instructions for filing an amended tax return   Free help in preparing your return is available nationwide from IRS-trained volunteers. Instructions for filing an amended tax return The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Instructions for filing an amended tax return Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Instructions for filing an amended tax return To find the nearest VITA or TCE site, call 1-800-829-1040. Instructions for filing an amended tax return   As part of the TCE program, AARP offers the Tax-Aide counseling program. Instructions for filing an amended tax return To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website atwww. Instructions for filing an amended tax return aarp. Instructions for filing an amended tax return org/money/taxaide. Instructions for filing an amended tax return   For more information on these programs, go to www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov and enter keyword “VITA” in the upper right-hand corner. Instructions for filing an amended tax return Internet. Instructions for filing an amended tax return You can access the IRS website at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov 24 hours a day, 7 days a week to: E-file your return. Instructions for filing an amended tax return Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Instructions for filing an amended tax return Check the status of your 2009 refund. Instructions for filing an amended tax return Go to www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov and click on Where's My Refund. Instructions for filing an amended tax return Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Instructions for filing an amended tax return If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Instructions for filing an amended tax return Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Instructions for filing an amended tax return Download forms, instructions, and publications. Instructions for filing an amended tax return Order IRS products online. Instructions for filing an amended tax return Research your tax questions online. Instructions for filing an amended tax return Search publications online by topic or keyword. Instructions for filing an amended tax return Use the online Internal Revenue Code, Regulations, or other official guidance. Instructions for filing an amended tax return View Internal Revenue Bulletins (IRBs) published in the last few years. Instructions for filing an amended tax return Figure your withholding allowances using the withholding calculator online at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/individuals. Instructions for filing an amended tax return Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant. Instructions for filing an amended tax return Sign up to receive local and national tax news by email. Instructions for filing an amended tax return Get information on starting and operating a small business. Instructions for filing an amended tax return Phone. Instructions for filing an amended tax return Many services are available by phone. Instructions for filing an amended tax return Ordering forms, instructions, and publications. Instructions for filing an amended tax return Call 1-800-TAX FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Instructions for filing an amended tax return You should receive your order within 10 days. Instructions for filing an amended tax return Asking tax questions. Instructions for filing an amended tax return Call the IRS with your tax questions at 1-800-829-1040. Instructions for filing an amended tax return Solving problems. Instructions for filing an amended tax return You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Instructions for filing an amended tax return An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Instructions for filing an amended tax return Call your local Taxpayer Assistance Center for an appointment. Instructions for filing an amended tax return To find the number, go to www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Instructions for filing an amended tax return TTY/TDD equipment. Instructions for filing an amended tax return If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Instructions for filing an amended tax return TeleTax topics. Instructions for filing an amended tax return Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Instructions for filing an amended tax return Refund information. Instructions for filing an amended tax return To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Instructions for filing an amended tax return Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Instructions for filing an amended tax return If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Instructions for filing an amended tax return Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Instructions for filing an amended tax return Refunds are sent out weekly on Fridays. Instructions for filing an amended tax return If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Instructions for filing an amended tax return Other refund information. Instructions for filing an amended tax return To check the status of a prior year refund or amended return refund, call 1-800-829-1954. Instructions for filing an amended tax return Evaluating the quality of our telephone services. Instructions for filing an amended tax return To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Instructions for filing an amended tax return One method is for a second IRS representative to listen in on or record random telephone calls. Instructions for filing an amended tax return Another is to ask some callers to complete a short survey at the end of the call. Instructions for filing an amended tax return Walk-in. Instructions for filing an amended tax return Many products and services are available on a walk-in basis. Instructions for filing an amended tax return Products. Instructions for filing an amended tax return You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Instructions for filing an amended tax return Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Instructions for filing an amended tax return Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Instructions for filing an amended tax return Services. Instructions for filing an amended tax return You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Instructions for filing an amended tax return An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Instructions for filing an amended tax return If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Instructions for filing an amended tax return No appointment is necessary—just walk in. Instructions for filing an amended tax return If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Instructions for filing an amended tax return A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Instructions for filing an amended tax return If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Instructions for filing an amended tax return All other issues will be handled without an appointment. Instructions for filing an amended tax return To find the number of your local office, go to www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Instructions for filing an amended tax return Mail. Instructions for filing an amended tax return You can send your order for forms, instructions, and publications to the address below. Instructions for filing an amended tax return You should receive a response within 10 days after your request is received. Instructions for filing an amended tax return Internal Revenue Service1201 N. Instructions for filing an amended tax return Mitsubishi MotorwayBloomington, IL 61705-6613 DVD for tax products. Instructions for filing an amended tax return You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Instructions for filing an amended tax return Prior-year forms, instructions, and publications. Instructions for filing an amended tax return Tax Map: an electronic research tool and finding aid. Instructions for filing an amended tax return Tax law frequently asked questions. Instructions for filing an amended tax return Tax Topics from the IRS telephone response system. Instructions for filing an amended tax return Internal Revenue Code—Title 26 of the U. Instructions for filing an amended tax return S. Instructions for filing an amended tax return Code. Instructions for filing an amended tax return Fill-in, print, and save features for most tax forms. Instructions for filing an amended tax return Internal Revenue Bulletins. Instructions for filing an amended tax return Toll-free and email technical support. Instructions for filing an amended tax return Two releases during the year. Instructions for filing an amended tax return – The first release will ship the beginning of January 2010. Instructions for filing an amended tax return – The final release will ship the beginning of March 2010. Instructions for filing an amended tax return Purchase the DVD from National Technical Information Service (NTIS) at www. 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Types of Loans

There are different types of loans. Some are secured loans. This mean that your property and things you own are used as collateral, and if you cannot pay back the loan, the lender will take your collateral to get their money back. Other types of loans, unsecured loans, don’t use property as collateral. Lenders consider these as more risky than secured loans, so they charge a higher interest rate for them. Most credit cards are unsecured loans, although some consumers have secured credit cards. Two very common secured loans are home equity and installment loans.

Home-Equity Loans

A home equity loan could be a smart way to pay off high-interest debt or pay for home repairs. But consider carefully before taking out a home equity loan. If you are unable to make payments on time, you could lose your home.

Home equity loans can either be a revolving line of credit or a lump sum. Revolving credit lets you withdraw funds when you need them. A lump sum is a one-time closed-end loan, for a particular purpose, such as remodeling or tuition. Apply for a home equity loan through a bank or credit union first. These loans are likely to cost less than those offered by finance companies.

Installment Loans


Before you sign an agreement for a loan to buy a house, a car or other large purchase, make sure you fully understand all the lender's terms and conditions, including:

  • The dollar amount you are borrowing.
  • The payment amounts and when they are due.
  • The total finance charge, the total of all the interest and fees you must pay to get the loan.
  • The Annual Percentage Rate (APR), the rate of interest you will pay over the full term of the loan.
  • Penalties for late payments.
  • What the lender will do if you can't pay back the loan.
  • Penalties if you pay the loan back early

The Truth in Lending Act requires lenders to give you this information so you can compare different offers.

Payday and Tax Refund Loans

Payday loans are illegal in some states. Recent changes in the law for payday lenders have also made payday loans illegal for members of the military. With a typical payday loan, you might write a personal check for $115 to borrow $100 for two weeks, until payday. The annual percentage rate (APR) in this example is 390 percent! If you can repay the loan quickly, it may not appear such a bad deal. But if you can't pay off the loan quickly, that relatively small loan can grow into a large amount of debt. At 390 percent, a $100 loan will become $490 in a year and $2,401 in two years.

Another high cost way to borrow money is a tax refund loan. This type of credit lets you get an advance on a tax refund for a fee. APRs as high as 774% have been reported. If you are short of cash, avoid both of these loans by asking for more time to pay a bill or seeking a traditional loan. Even a cash advance on your credit card may cost less.

The Instructions For Filing An Amended Tax Return

Instructions for filing an amended tax return 4. Instructions for filing an amended tax return   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Instructions for filing an amended tax return Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Instructions for filing an amended tax return Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Instructions for filing an amended tax return Debt paid off. Instructions for filing an amended tax return Payment of cash. Instructions for filing an amended tax return Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Instructions for filing an amended tax return S. Instructions for filing an amended tax return Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Instructions for filing an amended tax return Exception 2. Instructions for filing an amended tax return Section 1256 contracts and straddles. Instructions for filing an amended tax return Market discount bonds. Instructions for filing an amended tax return File Form 1099-B or Form 1099-S with the IRS. Instructions for filing an amended tax return Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Instructions for filing an amended tax return Investment property. Instructions for filing an amended tax return   This is property that produces investment income. Instructions for filing an amended tax return Examples include stocks, bonds, and Treasury bills and notes. Instructions for filing an amended tax return Property used in a trade or business is not investment property. Instructions for filing an amended tax return Form 1099-B. Instructions for filing an amended tax return   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Instructions for filing an amended tax return You should receive the statement by February 15 of the next year. Instructions for filing an amended tax return It will show the gross proceeds from the sale. Instructions for filing an amended tax return The IRS will also get a copy of Form 1099-B from the broker. Instructions for filing an amended tax return   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Instructions for filing an amended tax return If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Instructions for filing an amended tax return This will help you complete Form 8949. Instructions for filing an amended tax return Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Instructions for filing an amended tax return    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Instructions for filing an amended tax return Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Instructions for filing an amended tax return Nominees. Instructions for filing an amended tax return   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Instructions for filing an amended tax return   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Instructions for filing an amended tax return Other property transactions. Instructions for filing an amended tax return   Certain transfers of property are discussed in other IRS publications. Instructions for filing an amended tax return These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Instructions for filing an amended tax return Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Instructions for filing an amended tax return Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Instructions for filing an amended tax return What Is a Sale or Trade? This section explains what is a sale or trade. Instructions for filing an amended tax return It also explains certain transactions and events that are treated as sales or trades. Instructions for filing an amended tax return A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Instructions for filing an amended tax return A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Instructions for filing an amended tax return Sale and purchase. Instructions for filing an amended tax return   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Instructions for filing an amended tax return The sale and purchase are two separate transactions. Instructions for filing an amended tax return But see Like-Kind Exchanges under Nontaxable Trades, later. Instructions for filing an amended tax return Redemption of stock. Instructions for filing an amended tax return   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Instructions for filing an amended tax return Dividend versus sale or trade. Instructions for filing an amended tax return   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Instructions for filing an amended tax return Both direct and indirect ownership of stock will be considered. Instructions for filing an amended tax return The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Instructions for filing an amended tax return Redemption or retirement of bonds. Instructions for filing an amended tax return   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Instructions for filing an amended tax return See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Instructions for filing an amended tax return   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Instructions for filing an amended tax return For details, see Regulations section 1. Instructions for filing an amended tax return 1001-3. Instructions for filing an amended tax return Surrender of stock. Instructions for filing an amended tax return   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Instructions for filing an amended tax return The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Instructions for filing an amended tax return Trade of investment property for an annuity. Instructions for filing an amended tax return   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Instructions for filing an amended tax return If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Instructions for filing an amended tax return Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Instructions for filing an amended tax return Transfer by inheritance. Instructions for filing an amended tax return   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Instructions for filing an amended tax return No taxable gain or deductible loss results from the transfer. Instructions for filing an amended tax return Termination of certain rights and obligations. Instructions for filing an amended tax return   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Instructions for filing an amended tax return Any gain or loss is treated as a capital gain or loss. Instructions for filing an amended tax return   This rule does not apply to the retirement of a debt instrument. Instructions for filing an amended tax return See Redemption or retirement of bonds , earlier. Instructions for filing an amended tax return Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Instructions for filing an amended tax return This affects whether your capital loss is long term or short term. Instructions for filing an amended tax return See Holding Period , later. Instructions for filing an amended tax return Worthless securities also include securities that you abandon after March 12, 2008. Instructions for filing an amended tax return To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Instructions for filing an amended tax return All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Instructions for filing an amended tax return If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Instructions for filing an amended tax return Do not deduct them in the year the stock became worthless. Instructions for filing an amended tax return How to report loss. Instructions for filing an amended tax return   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Instructions for filing an amended tax return    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Instructions for filing an amended tax return See Form 8949 and the Instructions for Form 8949. Instructions for filing an amended tax return Filing a claim for refund. Instructions for filing an amended tax return   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Instructions for filing an amended tax return You must use Form 1040X, Amended U. Instructions for filing an amended tax return S. Instructions for filing an amended tax return Individual Income Tax Return, to amend your return for the year the security became worthless. Instructions for filing an amended tax return You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Instructions for filing an amended tax return (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Instructions for filing an amended tax return ) For more information about filing a claim, see Publication 556. Instructions for filing an amended tax return Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Instructions for filing an amended tax return You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Instructions for filing an amended tax return This gives you a new holding period for the position that begins on the date of the constructive sale. Instructions for filing an amended tax return Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Instructions for filing an amended tax return Constructive sale. Instructions for filing an amended tax return   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Instructions for filing an amended tax return   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Instructions for filing an amended tax return For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Instructions for filing an amended tax return Exception for nonmarketable securities. Instructions for filing an amended tax return   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Instructions for filing an amended tax return Exception for certain closed transactions. Instructions for filing an amended tax return   Do not treat a transaction as a constructive sale if all of the following are true. Instructions for filing an amended tax return You closed the transaction on or before the 30th day after the end of your tax year. Instructions for filing an amended tax return You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Instructions for filing an amended tax return Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Instructions for filing an amended tax return   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Instructions for filing an amended tax return   This exception also applies to successive short sales of an entire appreciated financial position. Instructions for filing an amended tax return For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Instructions for filing an amended tax return This bulletin is available at www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/pub/irs-irbs/irb03-03. Instructions for filing an amended tax return pdf. Instructions for filing an amended tax return Appreciated financial position. Instructions for filing an amended tax return   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Instructions for filing an amended tax return Exceptions. Instructions for filing an amended tax return   An appreciated financial position does not include the following. Instructions for filing an amended tax return Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Instructions for filing an amended tax return Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Instructions for filing an amended tax return 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Instructions for filing an amended tax return Any hedge with respect to a position described in (2). Instructions for filing an amended tax return Certain trust instruments treated as stock. Instructions for filing an amended tax return   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Instructions for filing an amended tax return Sale of appreciated financial position. Instructions for filing an amended tax return   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Instructions for filing an amended tax return However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Instructions for filing an amended tax return Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Instructions for filing an amended tax return Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Instructions for filing an amended tax return Exceptions. Instructions for filing an amended tax return   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Instructions for filing an amended tax return For more details, including definitions of these terms, see section 1256. Instructions for filing an amended tax return Regulated futures contract. Instructions for filing an amended tax return   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Instructions for filing an amended tax return A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Instructions for filing an amended tax return Foreign currency contract. Instructions for filing an amended tax return   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Instructions for filing an amended tax return   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Instructions for filing an amended tax return   Special rules apply to certain foreign currency transactions. Instructions for filing an amended tax return These transactions may result in ordinary gain or loss treatment. Instructions for filing an amended tax return For details, see Internal Revenue Code section 988 and Regulations sections 1. Instructions for filing an amended tax return 988-1(a)(7) and 1. Instructions for filing an amended tax return 988-3. Instructions for filing an amended tax return Nonequity option. Instructions for filing an amended tax return   This is any listed option (defined later) that is not an equity option. Instructions for filing an amended tax return Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Instructions for filing an amended tax return A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Instructions for filing an amended tax return Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Instructions for filing an amended tax return Cash-settled options. Instructions for filing an amended tax return   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Instructions for filing an amended tax return   This rule does not apply to options established before the SEC determines that the stock index is broad based. Instructions for filing an amended tax return Listed option. Instructions for filing an amended tax return   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Instructions for filing an amended tax return A listed option, however, does not include an option that is a right to acquire stock from the issuer. Instructions for filing an amended tax return Dealer equity option. Instructions for filing an amended tax return   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Instructions for filing an amended tax return   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Instructions for filing an amended tax return Equity option. Instructions for filing an amended tax return   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Instructions for filing an amended tax return  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Instructions for filing an amended tax return Dealer securities futures contract. Instructions for filing an amended tax return   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Instructions for filing an amended tax return A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Instructions for filing an amended tax return Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Instructions for filing an amended tax return That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Instructions for filing an amended tax return Hedging exception. Instructions for filing an amended tax return   The marked-to-market rules do not apply to hedging transactions. Instructions for filing an amended tax return See Hedging Transactions , later. Instructions for filing an amended tax return 60/40 rule. Instructions for filing an amended tax return   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Instructions for filing an amended tax return This is true regardless of how long you actually held the property. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return On June 22, 2012, you bought a regulated futures contract for $50,000. Instructions for filing an amended tax return On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Instructions for filing an amended tax return You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Instructions for filing an amended tax return On February 1, 2013, you sold the contract for $56,000. Instructions for filing an amended tax return Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Instructions for filing an amended tax return Limited partners or entrepreneurs. Instructions for filing an amended tax return   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Instructions for filing an amended tax return Instead, these gains or losses are treated as short term. Instructions for filing an amended tax return Terminations and transfers. Instructions for filing an amended tax return   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Instructions for filing an amended tax return In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Instructions for filing an amended tax return Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Instructions for filing an amended tax return Loss carryback election. Instructions for filing an amended tax return   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Instructions for filing an amended tax return See How To Report , later, for information about reporting this election on your return. Instructions for filing an amended tax return   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Instructions for filing an amended tax return In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Instructions for filing an amended tax return   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Instructions for filing an amended tax return In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Instructions for filing an amended tax return   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Instructions for filing an amended tax return (See Capital Losses under Reporting Capital Gains and Losses, later. Instructions for filing an amended tax return ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Instructions for filing an amended tax return In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Instructions for filing an amended tax return Net section 1256 contracts loss. Instructions for filing an amended tax return   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Instructions for filing an amended tax return Net section 1256 contracts gain. Instructions for filing an amended tax return   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Instructions for filing an amended tax return  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Instructions for filing an amended tax return Traders in section 1256 contracts. Instructions for filing an amended tax return   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Instructions for filing an amended tax return However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Instructions for filing an amended tax return Treatment of underlying property. Instructions for filing an amended tax return   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Instructions for filing an amended tax return How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Instructions for filing an amended tax return Form 6781. Instructions for filing an amended tax return   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Instructions for filing an amended tax return This includes the amount shown in box 10 of Form 1099-B. Instructions for filing an amended tax return Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Instructions for filing an amended tax return Include a copy of Form 6781 with your income tax return. Instructions for filing an amended tax return   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Instructions for filing an amended tax return Follow the Form 6781 instructions for completing Part I. Instructions for filing an amended tax return Loss carryback election. Instructions for filing an amended tax return   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Instructions for filing an amended tax return Follow the instructions for completing Form 6781 for the loss year to make this election. Instructions for filing an amended tax return Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Instructions for filing an amended tax return A transaction is a hedging transaction if both of the following conditions are met. Instructions for filing an amended tax return You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Instructions for filing an amended tax return You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Instructions for filing an amended tax return This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Instructions for filing an amended tax return A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Instructions for filing an amended tax return A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Instructions for filing an amended tax return However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Instructions for filing an amended tax return Hedging loss limit. Instructions for filing an amended tax return   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Instructions for filing an amended tax return A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Instructions for filing an amended tax return   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Instructions for filing an amended tax return Ignore any hedging transaction items in determining this taxable income. Instructions for filing an amended tax return If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Instructions for filing an amended tax return   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Instructions for filing an amended tax return   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Instructions for filing an amended tax return The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Instructions for filing an amended tax return Sale of property used in a hedge. Instructions for filing an amended tax return   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Instructions for filing an amended tax return Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Instructions for filing an amended tax return See the Instructions for Schedule SE (Form 1040). Instructions for filing an amended tax return In addition, the rules relating to contributions to self-employment retirement plans apply. Instructions for filing an amended tax return For information on retirement plan contributions, see Publication 560 and Publication 590. Instructions for filing an amended tax return Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Instructions for filing an amended tax return You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Instructions for filing an amended tax return Investment property you buy normally has an original basis equal to its cost. Instructions for filing an amended tax return If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Instructions for filing an amended tax return Cost Basis The basis of property you buy is usually its cost. Instructions for filing an amended tax return The cost is the amount you pay in cash, debt obligations, or other property or services. Instructions for filing an amended tax return Unstated interest. Instructions for filing an amended tax return   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Instructions for filing an amended tax return You generally have unstated interest if your interest rate is less than the applicable federal rate. Instructions for filing an amended tax return For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Instructions for filing an amended tax return Basis Other Than Cost There are times when you must use a basis other than cost. Instructions for filing an amended tax return In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Instructions for filing an amended tax return Fair market value. Instructions for filing an amended tax return   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Instructions for filing an amended tax return Sales of similar property, around the same date, may be helpful in figuring fair market value. Instructions for filing an amended tax return Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Instructions for filing an amended tax return The amount you include in income then becomes your basis in the property. Instructions for filing an amended tax return If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Instructions for filing an amended tax return Restricted property. Instructions for filing an amended tax return   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Instructions for filing an amended tax return Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Instructions for filing an amended tax return See Restricted Property in Publication 525 for more information. Instructions for filing an amended tax return Bargain purchases. Instructions for filing an amended tax return   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Instructions for filing an amended tax return Your basis in the property is the price you pay plus the amount you include in income. Instructions for filing an amended tax return Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You trade A Company stock for B Company stock having a fair market value of $1,200. Instructions for filing an amended tax return If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Instructions for filing an amended tax return If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Instructions for filing an amended tax return The basis of your B Company stock is $1,200. Instructions for filing an amended tax return If you later sell the B Company stock for $1,300, you will have a gain of $100. Instructions for filing an amended tax return Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Instructions for filing an amended tax return See Nontaxable Trades , later. Instructions for filing an amended tax return The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Instructions for filing an amended tax return Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Instructions for filing an amended tax return Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Instructions for filing an amended tax return Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Instructions for filing an amended tax return See Transfers Between Spouses , later. Instructions for filing an amended tax return Recordkeeping. Instructions for filing an amended tax return The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Instructions for filing an amended tax return Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Instructions for filing an amended tax return Fair market value less than donor's adjusted basis. Instructions for filing an amended tax return   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Instructions for filing an amended tax return Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Instructions for filing an amended tax return No gain or loss. Instructions for filing an amended tax return   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Instructions for filing an amended tax return The fair market value at the time of the gift is $9,000. Instructions for filing an amended tax return You later sell the property for $9,500. Instructions for filing an amended tax return You have neither gain nor loss. Instructions for filing an amended tax return Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Instructions for filing an amended tax return Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Instructions for filing an amended tax return Fair market value equal to or more than donor's adjusted basis. Instructions for filing an amended tax return   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Instructions for filing an amended tax return Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Instructions for filing an amended tax return Gift received before 1977. Instructions for filing an amended tax return   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Instructions for filing an amended tax return However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Instructions for filing an amended tax return Example 1. Instructions for filing an amended tax return You were given XYZ Company stock in 1976. Instructions for filing an amended tax return At the time of the gift, the stock had a fair market value of $21,000. Instructions for filing an amended tax return The donor's adjusted basis was $20,000. Instructions for filing an amended tax return The donor paid a gift tax of $500 on the gift. Instructions for filing an amended tax return Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Instructions for filing an amended tax return Example 2. Instructions for filing an amended tax return The facts are the same as in Example 1 except that the gift tax paid was $1,500. Instructions for filing an amended tax return Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Instructions for filing an amended tax return Gift received after 1976. Instructions for filing an amended tax return   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Instructions for filing an amended tax return You figure this part by multiplying the gift tax paid on the gift by a fraction. Instructions for filing an amended tax return The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Instructions for filing an amended tax return   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Instructions for filing an amended tax return The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return In 2013, you received a gift of property from your mother. Instructions for filing an amended tax return At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Instructions for filing an amended tax return The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Instructions for filing an amended tax return You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Instructions for filing an amended tax return 701 ($61,000 ÷ $87,000) . Instructions for filing an amended tax return 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Instructions for filing an amended tax return   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Instructions for filing an amended tax return Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Instructions for filing an amended tax return For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Instructions for filing an amended tax return Gift tax information. Instructions for filing an amended tax return   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Instructions for filing an amended tax return For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Instructions for filing an amended tax return Property Received as Inheritance Before or after 2010. Instructions for filing an amended tax return   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Instructions for filing an amended tax return If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Instructions for filing an amended tax return For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Instructions for filing an amended tax return Appreciated property you gave the decedent. Instructions for filing an amended tax return   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Instructions for filing an amended tax return This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Instructions for filing an amended tax return Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Instructions for filing an amended tax return More information. Instructions for filing an amended tax return   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Instructions for filing an amended tax return Inherited in 2010 and executor elected to file Form 8939. Instructions for filing an amended tax return   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Instructions for filing an amended tax return Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Instructions for filing an amended tax return The result of these adjustments to the basis is the adjusted basis. Instructions for filing an amended tax return Adjustments to the basis of stocks and bonds are explained in the following discussion. Instructions for filing an amended tax return For information about other adjustments to basis, see Publication 551. Instructions for filing an amended tax return Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Instructions for filing an amended tax return If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Instructions for filing an amended tax return The basis of stock must be adjusted for certain events that occur after purchase. Instructions for filing an amended tax return For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Instructions for filing an amended tax return You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Instructions for filing an amended tax return These distributions, up to the amount of your basis, are a nontaxable return of capital. Instructions for filing an amended tax return The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Instructions for filing an amended tax return To find out more, go to www. Instructions for filing an amended tax return irs. Instructions for filing an amended tax return gov/Filing/Filing-Options. Instructions for filing an amended tax return Identifying stock or bonds sold. Instructions for filing an amended tax return   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Instructions for filing an amended tax return Adequate identification. Instructions for filing an amended tax return   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Instructions for filing an amended tax return Broker holds stock. Instructions for filing an amended tax return   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Instructions for filing an amended tax return  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Instructions for filing an amended tax return Single stock certificate. Instructions for filing an amended tax return   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Instructions for filing an amended tax return   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Instructions for filing an amended tax return Bonds. Instructions for filing an amended tax return   These methods of identification also apply to bonds sold or transferred. Instructions for filing an amended tax return Identification not possible. Instructions for filing an amended tax return   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Instructions for filing an amended tax return Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Instructions for filing an amended tax return In January 1999 you bought another 200 shares for $11 a share. Instructions for filing an amended tax return In July 1999 you gave your son 50 shares. Instructions for filing an amended tax return In December 2001 you bought 100 shares for $9 a share. Instructions for filing an amended tax return In April 2013 you sold 130 shares. Instructions for filing an amended tax return You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Instructions for filing an amended tax return The shares of stock you gave your son had a basis of $500 (50 × $10). Instructions for filing an amended tax return You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Instructions for filing an amended tax return    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You bought 100 shares of Fund A for $10 a share. Instructions for filing an amended tax return You paid a $50 commission to the broker for the purchase. Instructions for filing an amended tax return Your cost basis for each share is $10. Instructions for filing an amended tax return 50 ($1,050 ÷ 100). Instructions for filing an amended tax return Commissions and load charges. Instructions for filing an amended tax return   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Instructions for filing an amended tax return You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Instructions for filing an amended tax return A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Instructions for filing an amended tax return   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Instructions for filing an amended tax return You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Instructions for filing an amended tax return You dispose of the shares within 90 days of the purchase date. Instructions for filing an amended tax return You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Instructions for filing an amended tax return   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Instructions for filing an amended tax return The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Instructions for filing an amended tax return Choosing average basis for mutual fund shares. Instructions for filing an amended tax return   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Instructions for filing an amended tax return The methods you can use to figure average basis are explained later. Instructions for filing an amended tax return Undistributed capital gains. Instructions for filing an amended tax return   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Instructions for filing an amended tax return See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Instructions for filing an amended tax return Reinvestment right. Instructions for filing an amended tax return   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Instructions for filing an amended tax return      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Instructions for filing an amended tax return This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Instructions for filing an amended tax return Table 4-1. Instructions for filing an amended tax return This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Instructions for filing an amended tax return Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Instructions for filing an amended tax return This worksheet will help you figure the adjusted basis when you sell or redeem shares. Instructions for filing an amended tax return Table 4-1. Instructions for filing an amended tax return Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Instructions for filing an amended tax return 2 Cost plus or minus adjustments. Instructions for filing an amended tax return Automatic investment service. Instructions for filing an amended tax return   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Instructions for filing an amended tax return Dividend reinvestment plans. Instructions for filing an amended tax return   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Instructions for filing an amended tax return You must include the amount of the discount in your income. Instructions for filing an amended tax return Public utilities. Instructions for filing an amended tax return   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Instructions for filing an amended tax return Stock dividends. Instructions for filing an amended tax return   Stock dividends are distributions made by a corporation of its own stock. Instructions for filing an amended tax return Generally, stock dividends are not taxable to you. Instructions for filing an amended tax return However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Instructions for filing an amended tax return If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Instructions for filing an amended tax return New and old stock identical. Instructions for filing an amended tax return   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Instructions for filing an amended tax return The result is your basis for each share of stock. Instructions for filing an amended tax return Example 1. Instructions for filing an amended tax return You owned one share of common stock that you bought for $45. Instructions for filing an amended tax return The corporation distributed two new shares of common stock for each share held. Instructions for filing an amended tax return You then had three shares of common stock. Instructions for filing an amended tax return Your basis in each share is $15 ($45 ÷ 3). Instructions for filing an amended tax return Example 2. Instructions for filing an amended tax return You owned two shares of common stock. Instructions for filing an amended tax return You bought one for $30 and the other for $45. Instructions for filing an amended tax return The corporation distributed two new shares of common stock for each share held. Instructions for filing an amended tax return You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Instructions for filing an amended tax return New and old stock not identical. Instructions for filing an amended tax return   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Instructions for filing an amended tax return Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You bought a share of common stock for $100. Instructions for filing an amended tax return Later, the corporation distributed a share of preferred stock for each share of common stock held. Instructions for filing an amended tax return At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Instructions for filing an amended tax return You figure the basis of the old and new stock by dividing your $100 basis between them. Instructions for filing an amended tax return The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Instructions for filing an amended tax return Stock bought at various times. Instructions for filing an amended tax return   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Instructions for filing an amended tax return Taxable stock dividends. Instructions for filing an amended tax return   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Instructions for filing an amended tax return The basis of your old stock does not change. Instructions for filing an amended tax return Stock splits. Instructions for filing an amended tax return   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Instructions for filing an amended tax return Stock rights. Instructions for filing an amended tax return   A stock right is a right to acquire a corporation's stock. Instructions for filing an amended tax return It may be exercised, it may be sold if it has a market value, or it may expire. Instructions for filing an amended tax return Stock rights are rarely taxable when you receive them. Instructions for filing an amended tax return See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Instructions for filing an amended tax return Taxable stock rights. Instructions for filing an amended tax return   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Instructions for filing an amended tax return The basis of the old stock does not change. Instructions for filing an amended tax return Nontaxable stock rights. Instructions for filing an amended tax return   If you receive nontaxable stock rights and allow them to expire, they have no basis. Instructions for filing an amended tax return   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Instructions for filing an amended tax return Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Instructions for filing an amended tax return   If the fair market value of the stock rights was less than 15%, their basis is zero. Instructions for filing an amended tax return However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Instructions for filing an amended tax return To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Instructions for filing an amended tax return Basis of new stock. Instructions for filing an amended tax return   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You own 100 shares of ABC Company stock, which cost you $22 per share. Instructions for filing an amended tax return The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Instructions for filing an amended tax return At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Instructions for filing an amended tax return Each stock right had a market value of $3. Instructions for filing an amended tax return The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Instructions for filing an amended tax return You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Instructions for filing an amended tax return 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Instructions for filing an amended tax return 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Instructions for filing an amended tax return 18 ($21. Instructions for filing an amended tax return 78 ÷ 10) per right. Instructions for filing an amended tax return If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Instructions for filing an amended tax return 18), or $28. Instructions for filing an amended tax return 18 per share. Instructions for filing an amended tax return The remaining basis of the old stock is $21. Instructions for filing an amended tax return 78 per share. Instructions for filing an amended tax return Investment property received in liquidation. Instructions for filing an amended tax return   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Instructions for filing an amended tax return S corporation stock. Instructions for filing an amended tax return   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Instructions for filing an amended tax return All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Instructions for filing an amended tax return The nonseparately stated income of the S corporation. Instructions for filing an amended tax return The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Instructions for filing an amended tax return   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Instructions for filing an amended tax return Distributions by the S corporation that were not included in your income. Instructions for filing an amended tax return All loss and deduction items of the S corporation that are separately stated and passed through to you. Instructions for filing an amended tax return Any nonseparately stated loss of the S corporation. Instructions for filing an amended tax return Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Instructions for filing an amended tax return The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Instructions for filing an amended tax return However, your basis in the stock cannot be reduced below zero. Instructions for filing an amended tax return Specialized small business investment company stock or partnership interest. Instructions for filing an amended tax return   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Instructions for filing an amended tax return See Rollover of Gain From Publicly Traded Securities , later. Instructions for filing an amended tax return Qualified small business stock. Instructions for filing an amended tax return   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Instructions for filing an amended tax return See Gains on Qualified Small Business Stock , later. Instructions for filing an amended tax return Short sales. Instructions for filing an amended tax return   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Instructions for filing an amended tax return   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Instructions for filing an amended tax return Premiums on bonds. Instructions for filing an amended tax return   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Instructions for filing an amended tax return If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Instructions for filing an amended tax return   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Instructions for filing an amended tax return You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Instructions for filing an amended tax return   See Bond Premium Amortization in chapter 3 for more information. Instructions for filing an amended tax return Market discount on bonds. Instructions for filing an amended tax return   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Instructions for filing an amended tax return See Market Discount Bonds in chapter 1 for more information. Instructions for filing an amended tax return Bonds purchased at par value. Instructions for filing an amended tax return   A bond purchased at par value (face amount) has no premium or discount. Instructions for filing an amended tax return When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You purchased a bond several years ago for its par value of $10,000. Instructions for filing an amended tax return You sold the bond this year for $10,100. Instructions for filing an amended tax return You have a gain of $100. Instructions for filing an amended tax return However, if you had sold the bond for $9,900, you would have a loss of $100. Instructions for filing an amended tax return Acquisition discount on short-term obligations. Instructions for filing an amended tax return   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Instructions for filing an amended tax return See Discount on Short-Term Obligations in chapter 1 for more information. Instructions for filing an amended tax return Original issue discount (OID) on debt instruments. Instructions for filing an amended tax return   Increase the basis of a debt instrument by the OID you include in your income. Instructions for filing an amended tax return See Original Issue Discount (OID) in chapter 1. Instructions for filing an amended tax return Discounted tax-exempt obligations. Instructions for filing an amended tax return   OID on tax-exempt obligations is generally not taxable. Instructions for filing an amended tax return However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Instructions for filing an amended tax return The accrued OID is added to the basis of the obligation to determine your gain or loss. Instructions for filing an amended tax return   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Instructions for filing an amended tax return   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Instructions for filing an amended tax return See Discount on Short-Term Obligations in chapter 1. Instructions for filing an amended tax return Stripped tax-exempt obligation. Instructions for filing an amended tax return   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Instructions for filing an amended tax return For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Instructions for filing an amended tax return You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Instructions for filing an amended tax return   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Instructions for filing an amended tax return Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Instructions for filing an amended tax return In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Instructions for filing an amended tax return How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Instructions for filing an amended tax return Gain. Instructions for filing an amended tax return   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Instructions for filing an amended tax return Loss. Instructions for filing an amended tax return   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Instructions for filing an amended tax return Amount realized. Instructions for filing an amended tax return   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Instructions for filing an amended tax return Amount realized includes the money you receive plus the fair market value of any property or services you receive. Instructions for filing an amended tax return   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Instructions for filing an amended tax return For more information, see Publication 537. Instructions for filing an amended tax return   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Instructions for filing an amended tax return See Regulations section 1. Instructions for filing an amended tax return 1001-1(g). Instructions for filing an amended tax return However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Instructions for filing an amended tax return Fair market value. Instructions for filing an amended tax return   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Instructions for filing an amended tax return Your gain is $3,000 ($10,000 – $7,000). Instructions for filing an amended tax return If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Instructions for filing an amended tax return Debt paid off. Instructions for filing an amended tax return   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Instructions for filing an amended tax return This is true even if neither you nor the buyer is personally liable for the debt. Instructions for filing an amended tax return For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Instructions for filing an amended tax return Example. Instructions for filing an amended tax return You sell stock that you had pledged as security for a bank loan of $8,000. Instructions for filing an amended tax return Your basis in the stock is $6,000. Instructions for filing an amended tax return The buyer pays off your bank loan and pays you $20,000 in cash. Instructions for filing an amended tax return The amount realized is $28,000 ($20,000 + $8,000). Instructions for filing an amended tax return Your gain is $22,000 ($28,000 – $6,000). Instructions for filing an amended tax return Payment of cash. Instructions for filing an amended tax return   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Instructions for filing an amended tax return Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Instructions for filing an amended tax return If the result is a positive number, it is a gain. Instructions for filing an amended tax return If the result is a negative number, it is a loss. Instructions for filing an amended tax return No gain or loss. Instructions for filing an amended tax return   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Instructions for filing an amended tax return In this case, you may have neither a gain nor a loss. Instructions for filing an amended tax return See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Instructions for filing an amended tax return Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Instructions for filing an amended tax return If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu