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Taxslayer 2011

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Taxslayer 2011

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

IR-2014-18, Feb. 24, 2014
 

WASHINGTON — The Internal Revenue Service today announced the release of its IRS Criminal Investigation (CI) Annual Report for fiscal year 2013, reflecting significant increases in enforcement actions against tax criminals and a robust rise in convictions, including identity theft. 

CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in a manner to foster confidence in the tax system and compliance with the law.

High points of fiscal year 2013 include a 12.5 percent increase in investigations initiated compared to the prior year and a nearly 18 percent gain in prosecution recommendations. Specifically, CI initiated 5,314 cases and recommended 4,364 cases for prosecution. These increases were accomplished at a time when agent resources decreased more than 5 percent.

Meanwhile, convictions rose more than 25 percent compared to the prior year. The conviction rate for fiscal 2013 was 93 percent.

“The conviction rate is especially important because it reflects the quality of our case work, our teamwork with law enforcement partners and the U.S. Attorneys’ Offices, and it represents an increase over 2011 and 2012,” said Richard Weber, Chief of Criminal Investigation.

CI continues to play a vital role in the fight against identity theft. CI initiated over 1,400 investigations and recommended prosecution of over 1,250 individuals who were involved in identity theft crimes during fiscal 2013.

As an active partner in over 35 Identity Theft Task Forces, CI works side-by-side with federal, state and local law-enforcement agencies to combat the threat of this insidious crime. One of those task forces, the Tampa Bay Identity Theft Alliance, was recently recognized as the "2013 Task Force of the Year," a national award given by the International Association of Financial Crimes Investigators for investigative excellence and outstanding public service. The Tampa Bay Identity Theft Alliance was formed last year and comprises of 20 Tampa Bay federal, state and local law enforcement agencies and prosecutors.

“The Alliance represents true teamwork by all levels of law enforcement,” Weber said. “Individuals who commit identity theft demonstrate a blatant disregard of the integrity of the United States tax system and cause immeasurable hardship to innocent victims.”

In addition, the 36-page report summarizes a wide variety of IRS CI activity on a range of tax crimes, money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes during the fiscal year ending Sept. 30, 2013.

“Our cases involved individuals and corporations from all segments of society. They led us into corporate board rooms, offices of public officials, tax preparation businesses, identity theft gangs and narcotics trafficking organizations,” Weber said.

"This report highlights some of the many noteworthy cases that were completed by CI, which is just the tip of the iceberg of the complex cases we completed this past year,” Weber added. “The dedication and enthusiasm of our employees was a driving force behind these achievements. IRS-CI continues to make our mark in history as the best financial investigators in the world."

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The Taxslayer 2011

Taxslayer 2011 Publication 535 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Taxslayer 2011 Tax questions. Taxslayer 2011 Future Developments What's New for 2013 What's New for 2014 Reminders Introduction This publication discusses common business expenses and explains what is and is not deductible. Taxslayer 2011 The general rules for deducting business expenses are discussed in the opening chapter. Taxslayer 2011 The chapters that follow cover specific expenses and list other publications and forms you may need. Taxslayer 2011 Comments and suggestions. Taxslayer 2011   We welcome your comments about this publication and your suggestions for future editions. Taxslayer 2011   You can send your comments to: Internal Revenue Service Tax Forms and Publications SE:W:CAR:MP:TFP 1111 Constitution Ave. Taxslayer 2011 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxslayer 2011 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxslayer 2011   You can send us comments from www. Taxslayer 2011 irs. Taxslayer 2011 gov/formspubs/. Taxslayer 2011 Click on “More Information” and then on “Give us feedback. Taxslayer 2011 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax publications. Taxslayer 2011 Ordering forms and publications. Taxslayer 2011   Visit www. Taxslayer 2011 irs. Taxslayer 2011 gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Taxslayer 2011 Internal Revenue Service 1201 N. Taxslayer 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 We cannot answer tax questions sent to either the “Comments and suggestions” or “Ordering forms and publications” address. Taxslayer 2011 Tax questions. Taxslayer 2011   If you have a tax-related question, please go to Help With Tax Questions on IRS. Taxslayer 2011 gov. Taxslayer 2011 If you've looked around our site and still didn't find the answer to your general tax question, please call our toll-free tax assistance line at 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business tax questions. Taxslayer 2011 Future Developments For the latest information about developments related to Publication 535, such as legislation enacted after it was published, go to www. Taxslayer 2011 irs. Taxslayer 2011 gov/pub535. Taxslayer 2011 What's New for 2013 The following items highlight some changes in the tax law for 2013. Taxslayer 2011 Optional safe harbor method to determine the business use of a home deduction. Taxslayer 2011  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Taxslayer 2011 For more information, see chapter 1. Taxslayer 2011 Standard mileage rate. Taxslayer 2011  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Taxslayer 2011 5 cents per mile. Taxslayer 2011 For more information, see chapter 11. Taxslayer 2011 Additional Medicare Tax. Taxslayer 2011  Beginning in 2013, a 0. Taxslayer 2011 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er) with dependent child. Taxslayer 2011 Medicare wages and self-employment income are combined to determine if your income exceeds the threshold. Taxslayer 2011 RRTA compensation should be separately compared to the threshold. Taxslayer 2011 For more information, see chapter 5 or visit www. Taxslayer 2011 irs. Taxslayer 2011 gov and enter the following words in the search box: Additional Medicare Tax. Taxslayer 2011 Retiree drug subsidy. Taxslayer 2011  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Taxslayer 2011 For more information, visit www. Taxslayer 2011 irs. Taxslayer 2011 gov and enter the following words in the search box: Retiree drug subsidy. Taxslayer 2011 What's New for 2014 The following item highlights a change in the tax law for 2014. Taxslayer 2011 Standard mileage rate. Taxslayer 2011  Beginning in 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. Taxslayer 2011 Film and television productions costs. Taxslayer 2011  The election to expense film and television production costs does not apply to productions that begin in 2014. Taxslayer 2011 For more information, see chapter 7. Taxslayer 2011 Reminders The following reminders and other items may help you file your tax return. Taxslayer 2011 IRS e-file (Electronic Filing) You can file your tax returns electronically using an IRS e-file option. Taxslayer 2011 The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. Taxslayer 2011 You can use one of the following IRS e-file options. Taxslayer 2011 Use an authorized IRS e-file provider. Taxslayer 2011 Use a personal computer. Taxslayer 2011 Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site. Taxslayer 2011 For details on these fast filing methods, see your income tax package. Taxslayer 2011 Form 1099 MISC. Taxslayer 2011  File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year in the course of your trade or business at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, and crop insurance proceeds. Taxslayer 2011 See the Instructions for Form 1099-MISC for more information and additional reporting requirements. Taxslayer 2011 Photographs of missing children. Taxslayer 2011  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Taxslayer 2011 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxslayer 2011 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) (24-hours a day, 7 days a week) if you recognize a child. Taxslayer 2011 Prev  Up  Next   Home   More Online Publications