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Turbotax For 2010 Tax Year

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Turbotax For 2010 Tax Year

Turbotax for 2010 tax year Publication 570 - Introductory Material Table of Contents Future developments. Turbotax for 2010 tax year What's New Reminders IntroductionOrdering forms and publications. Turbotax for 2010 tax year Tax questions. Turbotax for 2010 tax year Useful Items - You may want to see: Future developments. Turbotax for 2010 tax year For information about any additional changes to the 2013 tax law affecting Pub. Turbotax for 2010 tax year 570, please go to www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/pub570. Turbotax for 2010 tax year What's New Maximum income subject to social security tax. Turbotax for 2010 tax year . Turbotax for 2010 tax year  For 2013, the maximum amount of self-employment income subject to social security is $113,700. Turbotax for 2010 tax year Optional methods to figure net earnings. Turbotax for 2010 tax year . Turbotax for 2010 tax year  For 2013, the maximum income for using the optional methods is $4,640. Turbotax for 2010 tax year Additional Medicare Tax. Turbotax for 2010 tax year  Beginning in 2013, you may be required to pay Additional Medicare Tax. Turbotax for 2010 tax year Also, you may need to report Additional Medicare Tax withheld by your employer. Turbotax for 2010 tax year For more information, see Additional Medicare Tax under Special Rules for Completing Your U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Tax Return in chapter 4. Turbotax for 2010 tax year Net Investment Income Tax. Turbotax for 2010 tax year  Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Turbotax for 2010 tax year 8% tax on the lesser of an individual's net investment income or the excess of the individual's modified adjusted gross income over a specified threshold amount. Turbotax for 2010 tax year Bona fide residents of Puerto Rico and American Samoa who have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer's modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Turbotax for 2010 tax year Also, bona fide residents must take into account any additional tax liability associated with the NIIT when calculating their estimated tax payments. Turbotax for 2010 tax year The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Turbotax for 2010 tax year For more information, see Net Investment Income Tax under Bona Fide Resident of American Samoa and Bona Fide Resident of Puerto Rico in chapter 3. Turbotax for 2010 tax year Reminders Individual taxpayer identification numbers (ITINs) for aliens. Turbotax for 2010 tax year  If you are a nonresident or resident alien and you do not have and are not eligible to get a social security number (SSN), you must apply for an ITIN. Turbotax for 2010 tax year For details on how to do so, see Form W-7, Application for IRS Individual Taxpayer Identification Number, and its instructions. Turbotax for 2010 tax year Allow 6 weeks for the IRS to notify you of your ITIN (8-10 weeks if submitted during peak processing periods (January 15 through April 30) or if you are filing from overseas). Turbotax for 2010 tax year If you already have an ITIN, enter it wherever your SSN is requested on your tax return. Turbotax for 2010 tax year Effective January 1, 2013, the IRS implemented new procedures that affect the Individual Taxpayer Identification Number (ITIN) application process. Turbotax for 2010 tax year The documentation requirements for individuals seeking an ITIN, have been superseded by these changes. Turbotax for 2010 tax year Authorized representatives are required to complete forensic training and submit the certificate of completion to the IRS no later than January 31, 2014. Turbotax for 2010 tax year Taxpayers and their representatives should review these program changes, which are further explained in the Frequently Asked Questions at www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/Individuals/Individual-Taxpayer-Identification-Number-(ITIN), before requesting an ITIN. Turbotax for 2010 tax year An ITIN is for tax use only. Turbotax for 2010 tax year It does not entitle you to social security benefits or change your employment or immigration status under U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year law. Turbotax for 2010 tax year Electronic filing. Turbotax for 2010 tax year . Turbotax for 2010 tax year  You can e-file Form 1040-SS. Turbotax for 2010 tax year For general information about  electronic filing, visit www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/efile. Turbotax for 2010 tax year Earned income credit (EIC). Turbotax for 2010 tax year  Generally, if you are a bona fide resident of a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possession, you cannot claim the EIC on your U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year tax return. Turbotax for 2010 tax year However, certain U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possessions may allow bona fide residents to claim the EIC on their possession tax return. Turbotax for 2010 tax year To claim the EIC on your U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year tax return, your home (and your spouse's if filing a joint return) must have been in the United States for more than half the year. Turbotax for 2010 tax year If you have a child, the child must have lived with you in the United States for more than half the year. Turbotax for 2010 tax year For this purpose, the United States includes only the 50 states and the District of Columbia. Turbotax for 2010 tax year Special rules apply to military personnel stationed outside the United States. Turbotax for 2010 tax year For more information on this credit, see Publication 596, Earned Income Credit. Turbotax for 2010 tax year Form 8938, Statement of Specified Foreign Financial Assets. Turbotax for 2010 tax year  If you have specified foreign financial assets in foreign jurisdictions valued above certain threshold dollar amounts, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, when you file your U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year income tax return with the IRS. Turbotax for 2010 tax year If you are required to file Form 8938, you do not have to report certain specified foreign financial assets on Form 8938. Turbotax for 2010 tax year See Bona fide resident of a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possession, in the Instructions for Form 8938 for more details. Turbotax for 2010 tax year For additional details, go to the page for the Foreign Account Tax Compliance Act (FATCA) at www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/businesses/corporations/article/0,,id=236667,00. Turbotax for 2010 tax year html. Turbotax for 2010 tax year If you do not have to file a federal income tax return with the United States, you are not required to file a Form 8938 with the IRS. Turbotax for 2010 tax year Change of address. Turbotax for 2010 tax year  If you change your mailing address, use Form 8822, Change of Address, to notify the Internal Revenue Service and U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possession tax administration, if appropriate. Turbotax for 2010 tax year Mail Form 8822 to the Internal Revenue Service Center or U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possession tax administration for your old address (addresses for the Service Centers are on the back of the form). Turbotax for 2010 tax year If you change your address before filing your tax return, write the new address in the appropriate boxes of your tax return when you file. Turbotax for 2010 tax year Photographs of missing children. Turbotax for 2010 tax year  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Turbotax for 2010 tax year Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Turbotax for 2010 tax year You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Turbotax for 2010 tax year Introduction This publication discusses how to treat income received from the following U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possessions on your tax return(s). Turbotax for 2010 tax year American Samoa. Turbotax for 2010 tax year The Commonwealth of Puerto Rico (Puerto Rico). Turbotax for 2010 tax year The Commonwealth of the Northern Mariana Islands (CNMI). Turbotax for 2010 tax year Guam. Turbotax for 2010 tax year The U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Virgin Islands (USVI). Turbotax for 2010 tax year Unless stated otherwise, when the term “possession” is used in this publication, it includes the Commonwealths of Puerto Rico and the Northern Mariana Islands. Turbotax for 2010 tax year Chapter 1 discusses the requirements for being considered a bona fide resident of the listed possessions. Turbotax for 2010 tax year Chapter 2 gives the rules for determining if your income is from sources within, or effectively connected with a trade or business in, those possessions. Turbotax for 2010 tax year Next, chapter 3 looks at the rules for filing tax returns when you receive income from any of these possessions. Turbotax for 2010 tax year You may have to file a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year tax return only, a possession tax return only, or both returns. Turbotax for 2010 tax year This generally depends on whether you are a bona fide resident of the possession. Turbotax for 2010 tax year In some cases, you may have to file a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year return, but will be able to exclude income earned in a possession from U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year tax. Turbotax for 2010 tax year You can find illustrated examples of some of the additional forms required in chapter 5. Turbotax for 2010 tax year If you are not a bona fide resident of one of the possessions listed earlier, or are otherwise required to file a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year income tax return, the information in chapter 4 will tell you how to file your U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year tax return. Turbotax for 2010 tax year This information also applies if you have income from U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year insular areas other than the five possessions listed earlier because that income will not qualify for any of the exclusions or other benefits discussed in chapter 3. Turbotax for 2010 tax year These other U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year insular areas include: Baker Island, Howland Island, Jarvis Island, Johnston Island, Kingman Reef, Midway Islands, Palmyra Atoll, and Wake Island. Turbotax for 2010 tax year If you need information on U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year taxation, write to: Internal Revenue Service Philadelphia, PA 19255-0725 If you need additional information on your tax obligations in a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year possession, write to the tax department of that possession. Turbotax for 2010 tax year Their addresses are provided in chapter 3 under the individual headings for each possession. Turbotax for 2010 tax year Comments and suggestions. Turbotax for 2010 tax year   We welcome your comments about this publication and your suggestions for future editions. Turbotax for 2010 tax year   You can send us comments from www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/formspubs/. Turbotax for 2010 tax year Click on “More Information”and then on “Comment on Tax Forms and Publications. Turbotax for 2010 tax year ” Or you can write to us at the following address: Internal Revenue Service Tax Forms and Publications SE:W:CAR:MP:TFP 1111 Constitution Ave. Turbotax for 2010 tax year NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Turbotax for 2010 tax year Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Turbotax for 2010 tax year   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Turbotax for 2010 tax year Ordering forms and publications. Turbotax for 2010 tax year   Visit www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Turbotax for 2010 tax year Internal Revenue Service 1201 N. Turbotax for 2010 tax year Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Turbotax for 2010 tax year   If you have a tax question, check the information available on IRS. Turbotax for 2010 tax year gov or call 1-800-829-1040. Turbotax for 2010 tax year We cannot answer tax questions sent to either of the above addresses. Turbotax for 2010 tax year You can get the necessary possession tax forms at the tax office for the appropriate possession. Turbotax for 2010 tax year The office addresses are given in chapter 3. Turbotax for 2010 tax year Useful Items - You may want to see: Publication 54 Tax Guide for U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Citizens and Resident Aliens Abroad 514 Foreign Tax Credit for Individuals 519 U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Tax Guide for Aliens Form (and Instructions) 1040-PR Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico) 1040-SS U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico) 1116 Foreign Tax Credit 4563 Exclusion of Income for Bona Fide Residents of American Samoa 4868 Application for Automatic Extension of Time To File U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Individual Income Tax Return 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI) 8689 Allocation of Individual Income Tax to the U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Virgin Islands 8898 Statement for Individuals Who Begin or End Bona Fide Residence In a U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Possession 8959 Additional Medicare Tax 8960 Net Investment Income Tax—Individuals, Estates, and Trusts Prev  Up  Next   Home   More Online Publications
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Return Transcript

Tax Return Transcripts show most line items from your tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. This transcript does not reflect any changes you, your representative or the IRS made after you filed your return. In many cases, a Return Transcript will meet the requirements of lending institutions offering mortgages and student loans.

Page Last Reviewed or Updated: 10-Jan-2014

The Turbotax For 2010 Tax Year

Turbotax for 2010 tax year 1. Turbotax for 2010 tax year   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. Turbotax for 2010 tax year Amount realized on a recourse debt. Turbotax for 2010 tax year Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Individual Income Tax Return 1040X Amended U. Turbotax for 2010 tax year S. Turbotax for 2010 tax year Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Turbotax for 2010 tax year However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Turbotax for 2010 tax year See chapter 5 for information about getting publications and forms. Turbotax for 2010 tax year Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Turbotax for 2010 tax year An exchange is a transfer of property for other property or services. Turbotax for 2010 tax year The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Turbotax for 2010 tax year Sale or lease. Turbotax for 2010 tax year    Some agreements that seem to be leases may really be conditional sales contracts. Turbotax for 2010 tax year The intention of the parties to the agreement can help you distinguish between a sale and a lease. Turbotax for 2010 tax year   There is no test or group of tests to prove what the parties intended when they made the agreement. Turbotax for 2010 tax year You should consider each agreement based on its own facts and circumstances. Turbotax for 2010 tax year For more information, see chapter 3 in Publication 535, Business Expenses. Turbotax for 2010 tax year Cancellation of a lease. Turbotax for 2010 tax year    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Turbotax for 2010 tax year Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. Turbotax for 2010 tax year Copyright. Turbotax for 2010 tax year    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. Turbotax for 2010 tax year It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. Turbotax for 2010 tax year Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Turbotax for 2010 tax year   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. Turbotax for 2010 tax year For more information, see Section 1231 Gains and Losses in chapter 3. Turbotax for 2010 tax year Easement. Turbotax for 2010 tax year   The amount received for granting an easement is subtracted from the basis of the property. Turbotax for 2010 tax year If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. Turbotax for 2010 tax year If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. Turbotax for 2010 tax year   Any amount received that is more than the basis to be reduced is a taxable gain. Turbotax for 2010 tax year The transaction is reported as a sale of property. Turbotax for 2010 tax year   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. Turbotax for 2010 tax year However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. Turbotax for 2010 tax year   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Turbotax for 2010 tax year Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. Turbotax for 2010 tax year See Gain or Loss From Condemnations, later. Turbotax for 2010 tax year Property transferred to satisfy debt. Turbotax for 2010 tax year   A transfer of property to satisfy a debt is an exchange. Turbotax for 2010 tax year Note's maturity date extended. Turbotax for 2010 tax year   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Turbotax for 2010 tax year Also, it is not considered a closed and completed transaction that would result in a gain or loss. Turbotax for 2010 tax year However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. Turbotax for 2010 tax year Each case must be determined by its own facts. Turbotax for 2010 tax year For more information, see Regulations section 1. Turbotax for 2010 tax year 1001-3. Turbotax for 2010 tax year Transfer on death. Turbotax for 2010 tax year   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. Turbotax for 2010 tax year No taxable gain or deductible loss results from the transfer. Turbotax for 2010 tax year Bankruptcy. Turbotax for 2010 tax year   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Turbotax for 2010 tax year Consequently, the transfer generally does not result in gain or loss. Turbotax for 2010 tax year For more information, see Publication 908, Bankruptcy Tax Guide. Turbotax for 2010 tax year Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Turbotax for 2010 tax year A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Turbotax for 2010 tax year A loss is the adjusted basis of the property that is more than the amount you realize. Turbotax for 2010 tax year   Table 1-1. Turbotax for 2010 tax year How To Figure Whether You Have a Gain or Loss IF your. Turbotax for 2010 tax year . Turbotax for 2010 tax year . Turbotax for 2010 tax year THEN you have a. Turbotax for 2010 tax year . Turbotax for 2010 tax year . Turbotax for 2010 tax year Adjusted basis is more than the amount realized, Loss. Turbotax for 2010 tax year Amount realized is more than the adjusted basis, Gain. Turbotax for 2010 tax year Basis. Turbotax for 2010 tax year   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Turbotax for 2010 tax year The basis of property you buy is usually its cost. Turbotax for 2010 tax year However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. Turbotax for 2010 tax year See Basis Other Than Cost in Publication 551, Basis of Assets. Turbotax for 2010 tax year Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. Turbotax for 2010 tax year See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Turbotax for 2010 tax year Adjusted basis. Turbotax for 2010 tax year   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Turbotax for 2010 tax year Increases include costs of any improvements having a useful life of more than 1 year. Turbotax for 2010 tax year Decreases include depreciation and casualty losses. Turbotax for 2010 tax year For more details and additional examples, see Adjusted Basis in Publication 551. Turbotax for 2010 tax year Amount realized. Turbotax for 2010 tax year   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. Turbotax for 2010 tax year The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Turbotax for 2010 tax year Fair market value. Turbotax for 2010 tax year   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. Turbotax for 2010 tax year If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Turbotax for 2010 tax year If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You used a building in your business that cost you $70,000. Turbotax for 2010 tax year You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Turbotax for 2010 tax year You sold the building for $100,000 plus property having an FMV of $20,000. Turbotax for 2010 tax year The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Turbotax for 2010 tax year The selling expenses were $4,000. Turbotax for 2010 tax year Your gain on the sale is figured as follows. Turbotax for 2010 tax year Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. Turbotax for 2010 tax year   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Turbotax for 2010 tax year Recognized gains must be included in gross income. Turbotax for 2010 tax year Recognized losses are deductible from gross income. Turbotax for 2010 tax year However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Turbotax for 2010 tax year See Nontaxable Exchanges, later. Turbotax for 2010 tax year Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. Turbotax for 2010 tax year Interest in property. Turbotax for 2010 tax year   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. Turbotax for 2010 tax year If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. Turbotax for 2010 tax year Your basis in the property is disregarded. Turbotax for 2010 tax year This rule does not apply if all interests in the property are disposed of at the same time. Turbotax for 2010 tax year Example 1. Turbotax for 2010 tax year Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Turbotax for 2010 tax year You decide to sell your life interest in the farm. Turbotax for 2010 tax year The entire amount you receive is a recognized gain. Turbotax for 2010 tax year Your basis in the farm is disregarded. Turbotax for 2010 tax year Example 2. Turbotax for 2010 tax year The facts are the same as in Example 1, except that your brother joins you in selling the farm. Turbotax for 2010 tax year The entire interest in the property is sold, so your basis in the farm is not disregarded. Turbotax for 2010 tax year Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Turbotax for 2010 tax year Canceling a sale of real property. Turbotax for 2010 tax year   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. Turbotax for 2010 tax year If the buyer returns the property in the year of sale, no gain or loss is recognized. Turbotax for 2010 tax year This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. Turbotax for 2010 tax year If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. Turbotax for 2010 tax year When the property is returned in a later year, you acquire a new basis in the property. Turbotax for 2010 tax year That basis is equal to the amount you pay to the buyer. Turbotax for 2010 tax year Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. Turbotax for 2010 tax year You have a gain if the amount realized is more than your adjusted basis in the property. Turbotax for 2010 tax year However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Turbotax for 2010 tax year Bargain sales to charity. Turbotax for 2010 tax year   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Turbotax for 2010 tax year If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. Turbotax for 2010 tax year The adjusted basis of the part sold is figured as follows. Turbotax for 2010 tax year Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. Turbotax for 2010 tax year This allocation rule does not apply if a charitable contribution deduction is not allowable. Turbotax for 2010 tax year   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. Turbotax for 2010 tax year Your adjusted basis in the property is $4,000. Turbotax for 2010 tax year Your gain on the sale is $1,200, figured as follows. Turbotax for 2010 tax year Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. Turbotax for 2010 tax year You must subtract depreciation you took or could have taken from the basis of the business or rental part. Turbotax for 2010 tax year However, see the special rule below for a home used partly for business or rental. Turbotax for 2010 tax year You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Turbotax for 2010 tax year Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. Turbotax for 2010 tax year Any gain on the personal part of the property is a capital gain. Turbotax for 2010 tax year You cannot deduct a loss on the personal part. Turbotax for 2010 tax year Home used partly for business or rental. Turbotax for 2010 tax year    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Turbotax for 2010 tax year See Property Used Partly for Business or Rental, in Publication 523. Turbotax for 2010 tax year Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. Turbotax for 2010 tax year You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. Turbotax for 2010 tax year However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. Turbotax for 2010 tax year Figure the loss you can deduct as follows. Turbotax for 2010 tax year Use the lesser of the property's adjusted basis or fair market value at the time of the change. Turbotax for 2010 tax year Add to (1) the cost of any improvements and other increases to basis since the change. Turbotax for 2010 tax year Subtract from (2) depreciation and any other decreases to basis since the change. Turbotax for 2010 tax year Subtract the amount you realized on the sale from the result in (3). Turbotax for 2010 tax year If the amount you realized is more than the result in (3), treat this result as zero. Turbotax for 2010 tax year The result in (4) is the loss you can deduct. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You changed your main home to rental property 5 years ago. Turbotax for 2010 tax year At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Turbotax for 2010 tax year This year, you sold the property for $55,000. Turbotax for 2010 tax year You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Turbotax for 2010 tax year Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. Turbotax for 2010 tax year Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. Turbotax for 2010 tax year   If you have a gain on the sale, you generally must recognize the full amount of the gain. Turbotax for 2010 tax year You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Turbotax for 2010 tax year   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Turbotax for 2010 tax year However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Turbotax for 2010 tax year   For more information, see Business Use or Rental of Home in Publication 523. Turbotax for 2010 tax year In addition, special rules apply if the home sold was acquired in a like-kind exchange. Turbotax for 2010 tax year See Special Situations in Publication 523. Turbotax for 2010 tax year Also see Like-Kind Exchanges, later. Turbotax for 2010 tax year Abandonments The abandonment of property is a disposition of property. Turbotax for 2010 tax year You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Turbotax for 2010 tax year Generally, abandonment is not treated as a sale or exchange of the property. Turbotax for 2010 tax year If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Turbotax for 2010 tax year If your adjusted basis is more than the amount you realize (if any), then you have a loss. Turbotax for 2010 tax year Loss from abandonment of business or investment property is deductible as a loss. Turbotax for 2010 tax year A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Turbotax for 2010 tax year This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Turbotax for 2010 tax year If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Turbotax for 2010 tax year The abandonment loss is deducted in the tax year in which the loss is sustained. Turbotax for 2010 tax year If the abandoned property is secured by debt, special rules apply. Turbotax for 2010 tax year The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). Turbotax for 2010 tax year For more information, including examples, see chapter 3 of Publication 4681. Turbotax for 2010 tax year You cannot deduct any loss from abandonment of your home or other property held for personal use only. Turbotax for 2010 tax year Cancellation of debt. Turbotax for 2010 tax year   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. Turbotax for 2010 tax year This income is separate from any loss realized from abandonment of the property. Turbotax for 2010 tax year   You must report this income on your tax return unless one of the following applies. Turbotax for 2010 tax year The cancellation is intended as a gift. Turbotax for 2010 tax year The debt is qualified farm debt. Turbotax for 2010 tax year The debt is qualified real property business debt. Turbotax for 2010 tax year You are insolvent or bankrupt. Turbotax for 2010 tax year The debt is qualified principal residence indebtedness. Turbotax for 2010 tax year File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Turbotax for 2010 tax year For more information, including other exceptions and exclusion, see Publication 4681. Turbotax for 2010 tax year Forms 1099-A and 1099-C. Turbotax for 2010 tax year   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. Turbotax for 2010 tax year However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. Turbotax for 2010 tax year The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Turbotax for 2010 tax year For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Turbotax for 2010 tax year Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Turbotax for 2010 tax year The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Turbotax for 2010 tax year This is true even if you voluntarily return the property to the lender. Turbotax for 2010 tax year You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Turbotax for 2010 tax year Buyer's (borrower's) gain or loss. Turbotax for 2010 tax year   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Turbotax for 2010 tax year The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Turbotax for 2010 tax year See Gain or Loss From Sales and Exchanges, earlier. Turbotax for 2010 tax year You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Turbotax for 2010 tax year Amount realized on a nonrecourse debt. Turbotax for 2010 tax year   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. Turbotax for 2010 tax year The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Turbotax for 2010 tax year Example 1. Turbotax for 2010 tax year Chris bought a new car for $15,000. Turbotax for 2010 tax year He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Turbotax for 2010 tax year Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Turbotax for 2010 tax year The credit company repossessed the car because he stopped making loan payments. Turbotax for 2010 tax year The balance due after taking into account the payments Chris made was $10,000. Turbotax for 2010 tax year The fair market value of the car when repossessed was $9,000. Turbotax for 2010 tax year The amount Chris realized on the repossession is $10,000. Turbotax for 2010 tax year That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. Turbotax for 2010 tax year Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Turbotax for 2010 tax year He has a $5,000 nondeductible loss. Turbotax for 2010 tax year Example 2. Turbotax for 2010 tax year Abena paid $200,000 for her home. Turbotax for 2010 tax year She paid $15,000 down and borrowed the remaining $185,000 from a bank. Turbotax for 2010 tax year Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Turbotax for 2010 tax year The bank foreclosed on the loan because Abena stopped making payments. Turbotax for 2010 tax year When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. Turbotax for 2010 tax year The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Turbotax for 2010 tax year She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Turbotax for 2010 tax year She has a $5,000 realized gain. Turbotax for 2010 tax year Amount realized on a recourse debt. Turbotax for 2010 tax year   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Turbotax for 2010 tax year You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Turbotax for 2010 tax year The amount realized does not include the canceled debt that is your income from cancellation of debt. Turbotax for 2010 tax year See Cancellation of debt, below. Turbotax for 2010 tax year Seller's (lender's) gain or loss on repossession. Turbotax for 2010 tax year   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Turbotax for 2010 tax year For more information, see Repossession in Publication 537. Turbotax for 2010 tax year    Table 1-2. Turbotax for 2010 tax year Worksheet for Foreclosures and Repossessions Part 1. Turbotax for 2010 tax year Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Turbotax for 2010 tax year Complete this part only  if you were personally liable for the debt. Turbotax for 2010 tax year Otherwise,  go to Part 2. Turbotax for 2010 tax year   1. Turbotax for 2010 tax year Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. Turbotax for 2010 tax year Enter the fair market value of the transferred property   3. Turbotax for 2010 tax year Ordinary income from cancellation of debt upon foreclosure or    repossession. Turbotax for 2010 tax year * Subtract line 2 from line 1. Turbotax for 2010 tax year   If less than zero, enter zero   Part 2. Turbotax for 2010 tax year Figure your gain or loss from foreclosure or repossession. Turbotax for 2010 tax year   4. Turbotax for 2010 tax year If you completed Part 1, enter the smaller of line 1 or line 2. Turbotax for 2010 tax year   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Turbotax for 2010 tax year Enter any proceeds you received from the foreclosure sale   6. Turbotax for 2010 tax year Add lines 4 and 5   7. Turbotax for 2010 tax year Enter the adjusted basis of the transferred property   8. Turbotax for 2010 tax year Gain or loss from foreclosure or repossession. Turbotax for 2010 tax year Subtract line 7  from line 6   * The income may not be taxable. Turbotax for 2010 tax year See Cancellation of debt. Turbotax for 2010 tax year Cancellation of debt. Turbotax for 2010 tax year   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. Turbotax for 2010 tax year This income is separate from any gain or loss realized from the foreclosure or repossession. Turbotax for 2010 tax year Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Turbotax for 2010 tax year    You can use Table 1-2 to figure your income from cancellation of debt. Turbotax for 2010 tax year   You must report this income on your tax return unless one of the following applies. Turbotax for 2010 tax year The cancellation is intended as a gift. Turbotax for 2010 tax year The debt is qualified farm debt. Turbotax for 2010 tax year The debt is qualified real property business debt. Turbotax for 2010 tax year You are insolvent or bankrupt. Turbotax for 2010 tax year The debt is qualified principal residence indebtedness. Turbotax for 2010 tax year File Form 982 to report the income exclusion. Turbotax for 2010 tax year Example 1. Turbotax for 2010 tax year Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). Turbotax for 2010 tax year In this case, the amount he realizes is $9,000. Turbotax for 2010 tax year This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Turbotax for 2010 tax year Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Turbotax for 2010 tax year He has a $6,000 nondeductible loss. Turbotax for 2010 tax year He also is treated as receiving ordinary income from cancellation of debt. Turbotax for 2010 tax year That income is $1,000 ($10,000 − $9,000). Turbotax for 2010 tax year This is the part of the canceled debt not included in the amount realized. Turbotax for 2010 tax year Example 2. Turbotax for 2010 tax year Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). Turbotax for 2010 tax year In this case, the amount she realizes is $170,000. Turbotax for 2010 tax year This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Turbotax for 2010 tax year Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Turbotax for 2010 tax year She has a $5,000 nondeductible loss. Turbotax for 2010 tax year She also is treated as receiving ordinary income from cancellation of debt. Turbotax for 2010 tax year (The debt is not exempt from tax as discussed under Cancellation of debt, above. Turbotax for 2010 tax year ) That income is $10,000 ($180,000 − $170,000). Turbotax for 2010 tax year This is the part of the canceled debt not included in the amount realized. Turbotax for 2010 tax year Forms 1099-A and 1099-C. Turbotax for 2010 tax year   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. Turbotax for 2010 tax year However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. Turbotax for 2010 tax year The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Turbotax for 2010 tax year For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Turbotax for 2010 tax year Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Turbotax for 2010 tax year Involuntary conversions are also called involuntary exchanges. Turbotax for 2010 tax year Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Turbotax for 2010 tax year You report the gain or deduct the loss on your tax return for the year you realize it. Turbotax for 2010 tax year You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. Turbotax for 2010 tax year However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Turbotax for 2010 tax year Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Turbotax for 2010 tax year Your basis for the new property is the same as your basis for the converted property. Turbotax for 2010 tax year This means that the gain is deferred until a taxable sale or exchange occurs. Turbotax for 2010 tax year If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. Turbotax for 2010 tax year This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Turbotax for 2010 tax year If you have a gain or loss from the destruction or theft of property, see Publication 547. Turbotax for 2010 tax year Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Turbotax for 2010 tax year The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. Turbotax for 2010 tax year The owner receives a condemnation award (money or property) in exchange for the property taken. Turbotax for 2010 tax year A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Turbotax for 2010 tax year After the local government took action to condemn your property, you went to court to keep it. Turbotax for 2010 tax year But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Turbotax for 2010 tax year This is a condemnation of private property for public use. Turbotax for 2010 tax year Threat of condemnation. Turbotax for 2010 tax year   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. Turbotax for 2010 tax year You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Turbotax for 2010 tax year   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. Turbotax for 2010 tax year If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. Turbotax for 2010 tax year Reports of condemnation. Turbotax for 2010 tax year   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. Turbotax for 2010 tax year You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Turbotax for 2010 tax year If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year Your property lies along public utility lines. Turbotax for 2010 tax year The utility company has the authority to condemn your property. Turbotax for 2010 tax year The company informs you that it intends to acquire your property by negotiation or condemnation. Turbotax for 2010 tax year A threat of condemnation exists when you receive the notice. Turbotax for 2010 tax year Related property voluntarily sold. Turbotax for 2010 tax year   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. Turbotax for 2010 tax year A substantial economic relationship exists if together the properties were one economic unit. Turbotax for 2010 tax year You also must show that the condemned property could not reasonably or adequately be replaced. Turbotax for 2010 tax year You can elect to postpone reporting the gain by buying replacement property. Turbotax for 2010 tax year See Postponement of Gain, later. Turbotax for 2010 tax year Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. Turbotax for 2010 tax year If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Turbotax for 2010 tax year You can postpone reporting gain from a condemnation if you buy replacement property. Turbotax for 2010 tax year If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. Turbotax for 2010 tax year See Postponement of Gain, later. Turbotax for 2010 tax year If your net condemnation award is less than your adjusted basis, you have a loss. Turbotax for 2010 tax year If your loss is from property you held for personal use, you cannot deduct it. Turbotax for 2010 tax year You must report any deductible loss in the tax year it happened. Turbotax for 2010 tax year You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Turbotax for 2010 tax year Main home condemned. Turbotax for 2010 tax year   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Turbotax for 2010 tax year You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Turbotax for 2010 tax year For information on this exclusion, see Publication 523. Turbotax for 2010 tax year If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. Turbotax for 2010 tax year See Postponement of Gain, later. Turbotax for 2010 tax year Table 1-3. Turbotax for 2010 tax year Worksheet for Condemnations Part 1. Turbotax for 2010 tax year Gain from severance damages. Turbotax for 2010 tax year  If you did not receive severance damages, skip Part 1 and go to Part 2. Turbotax for 2010 tax year   1. Turbotax for 2010 tax year Enter gross severance damages received   2. Turbotax for 2010 tax year Enter your expenses in getting severance damages   3. Turbotax for 2010 tax year Subtract line 2 from line 1. Turbotax for 2010 tax year If less than zero, enter -0-   4. Turbotax for 2010 tax year Enter any special assessment on remaining property taken out of your award   5. Turbotax for 2010 tax year Net severance damages. Turbotax for 2010 tax year Subtract line 4 from line 3. Turbotax for 2010 tax year If less than zero, enter -0-   6. Turbotax for 2010 tax year Enter the adjusted basis of the remaining property   7. Turbotax for 2010 tax year Gain from severance damages. Turbotax for 2010 tax year Subtract line 6 from line 5. Turbotax for 2010 tax year If less than zero, enter -0-   8. Turbotax for 2010 tax year Refigured adjusted basis of the remaining property. Turbotax for 2010 tax year Subtract line 5 from line 6. Turbotax for 2010 tax year If less than zero, enter -0-   Part 2. Turbotax for 2010 tax year Gain or loss from condemnation award. Turbotax for 2010 tax year   9. Turbotax for 2010 tax year Enter the gross condemnation award received   10. Turbotax for 2010 tax year Enter your expenses in getting the condemnation award   11. Turbotax for 2010 tax year If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Turbotax for 2010 tax year If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Turbotax for 2010 tax year Otherwise, enter -0-   12. Turbotax for 2010 tax year Add lines 10 and 11   13. Turbotax for 2010 tax year Net condemnation award. Turbotax for 2010 tax year Subtract line 12 from line 9   14. Turbotax for 2010 tax year Enter the adjusted basis of the condemned property   15. Turbotax for 2010 tax year Gain from condemnation award. Turbotax for 2010 tax year If line 14 is more than line 13, enter -0-. Turbotax for 2010 tax year Otherwise, subtract line 14 from  line 13 and skip line 16   16. Turbotax for 2010 tax year Loss from condemnation award. Turbotax for 2010 tax year Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Turbotax for 2010 tax year )   Part 3. Turbotax for 2010 tax year Postponed gain from condemnation. Turbotax for 2010 tax year  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. Turbotax for 2010 tax year )   17. Turbotax for 2010 tax year If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Turbotax for 2010 tax year Otherwise, enter -0-   18. Turbotax for 2010 tax year If line 15 is more than zero, enter the amount from line 13. Turbotax for 2010 tax year Otherwise, enter -0-   19. Turbotax for 2010 tax year Add lines 17 and 18. Turbotax for 2010 tax year If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Turbotax for 2010 tax year Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Turbotax for 2010 tax year Subtract line 20 from line 19. Turbotax for 2010 tax year If less than zero, enter -0-   22. Turbotax for 2010 tax year If you completed Part 1, add lines 7 and 15. Turbotax for 2010 tax year Otherwise, enter the amount from line 15. Turbotax for 2010 tax year If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Turbotax for 2010 tax year Recognized gain. Turbotax for 2010 tax year Enter the smaller of line 21 or line 22. Turbotax for 2010 tax year   24. Turbotax for 2010 tax year Postponed gain. Turbotax for 2010 tax year Subtract line 23 from line 22. Turbotax for 2010 tax year If less than zero, enter -0-   Condemnation award. Turbotax for 2010 tax year   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Turbotax for 2010 tax year The award is also the amount you are paid for the sale of your property under threat of condemnation. Turbotax for 2010 tax year Payment of your debts. Turbotax for 2010 tax year   Amounts taken out of the award to pay your debts are considered paid to you. Turbotax for 2010 tax year Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year The state condemned your property for public use. Turbotax for 2010 tax year The award was set at $200,000. Turbotax for 2010 tax year The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Turbotax for 2010 tax year You are considered to have received the entire $200,000 as a condemnation award. Turbotax for 2010 tax year Interest on award. Turbotax for 2010 tax year   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Turbotax for 2010 tax year You must report the interest separately as ordinary income. Turbotax for 2010 tax year Payments to relocate. Turbotax for 2010 tax year   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Turbotax for 2010 tax year Do not include them in your income. Turbotax for 2010 tax year Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Turbotax for 2010 tax year Net condemnation award. Turbotax for 2010 tax year   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. Turbotax for 2010 tax year If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. Turbotax for 2010 tax year This is discussed later under Special assessment taken out of award. Turbotax for 2010 tax year Severance damages. Turbotax for 2010 tax year    Severance damages are not part of the award paid for the property condemned. Turbotax for 2010 tax year They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. Turbotax for 2010 tax year   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. Turbotax for 2010 tax year Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. Turbotax for 2010 tax year   The contracting parties should agree on the specific amount of severance damages in writing. Turbotax for 2010 tax year If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Turbotax for 2010 tax year   You cannot make a completely new allocation of the total award after the transaction is completed. Turbotax for 2010 tax year However, you can show how much of the award both parties intended for severance damages. Turbotax for 2010 tax year The severance damages part of the award is determined from all the facts and circumstances. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You sold part of your property to the state under threat of condemnation. Turbotax for 2010 tax year The contract you and the condemning authority signed showed only the total purchase price. Turbotax for 2010 tax year It did not specify a fixed sum for severance damages. Turbotax for 2010 tax year However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Turbotax for 2010 tax year You may treat this part as severance damages. Turbotax for 2010 tax year Treatment of severance damages. Turbotax for 2010 tax year   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Turbotax for 2010 tax year Use them to reduce the basis of the remaining property. Turbotax for 2010 tax year If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. Turbotax for 2010 tax year   If your net severance damages are more than the basis of your retained property, you have a gain. Turbotax for 2010 tax year You may be able to postpone reporting the gain. Turbotax for 2010 tax year See Postponement of Gain, later. Turbotax for 2010 tax year    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. Turbotax for 2010 tax year Net severance damages. Turbotax for 2010 tax year   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Turbotax for 2010 tax year You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. Turbotax for 2010 tax year The balance is your net severance damages. Turbotax for 2010 tax year Expenses of obtaining a condemnation award and severance damages. Turbotax for 2010 tax year   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Turbotax for 2010 tax year Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Turbotax for 2010 tax year If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You receive a condemnation award and severance damages. Turbotax for 2010 tax year One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Turbotax for 2010 tax year You had legal expenses for the entire condemnation proceeding. Turbotax for 2010 tax year You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Turbotax for 2010 tax year You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Turbotax for 2010 tax year Special assessment retained out of award. Turbotax for 2010 tax year   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. Turbotax for 2010 tax year An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Turbotax for 2010 tax year Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Turbotax for 2010 tax year   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Turbotax for 2010 tax year You were awarded $5,000 for this and spent $300 to get the award. Turbotax for 2010 tax year Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Turbotax for 2010 tax year The city then paid you only $4,300. Turbotax for 2010 tax year Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Turbotax for 2010 tax year If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). Turbotax for 2010 tax year The net award would not change, even if you later paid the assessment from the amount you received. Turbotax for 2010 tax year Severance damages received. Turbotax for 2010 tax year   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. Turbotax for 2010 tax year Any balance of the special assessment is used to reduce the condemnation award. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Turbotax for 2010 tax year You spent $300 to obtain the severance damages. Turbotax for 2010 tax year A special assessment of $800 was retained out of the award. Turbotax for 2010 tax year The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Turbotax for 2010 tax year Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Turbotax for 2010 tax year Part business or rental. Turbotax for 2010 tax year   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. Turbotax for 2010 tax year Figure your gain or loss separately because gain or loss on each part may be treated differently. Turbotax for 2010 tax year   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Turbotax for 2010 tax year You rented half the building and lived in the other half. Turbotax for 2010 tax year You paid $25,000 for the building and spent an additional $1,000 for a new roof. Turbotax for 2010 tax year You claimed allowable depreciation of $4,600 on the rental half. Turbotax for 2010 tax year You spent $200 in legal expenses to obtain the condemnation award. Turbotax for 2010 tax year Figure your gain or loss as follows. Turbotax for 2010 tax year     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. Turbotax for 2010 tax year Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. Turbotax for 2010 tax year Your basis for the new property is the same as your basis for the old. Turbotax for 2010 tax year Money or unlike property received. Turbotax for 2010 tax year   You ordinarily must report the gain if you receive money or unlike property. Turbotax for 2010 tax year You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. Turbotax for 2010 tax year You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. Turbotax for 2010 tax year See Controlling interest in a corporation, later. Turbotax for 2010 tax year   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Turbotax for 2010 tax year If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. Turbotax for 2010 tax year   The basis of the replacement property is its cost, reduced by the postponed gain. Turbotax for 2010 tax year Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. Turbotax for 2010 tax year See Controlling interest in a corporation, later. Turbotax for 2010 tax year You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Turbotax for 2010 tax year Postponing gain on severance damages. Turbotax for 2010 tax year   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. Turbotax for 2010 tax year See Treatment of severance damages, earlier. Turbotax for 2010 tax year You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). Turbotax for 2010 tax year   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. Turbotax for 2010 tax year If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. Turbotax for 2010 tax year   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Turbotax for 2010 tax year Postponing gain on the sale of related property. Turbotax for 2010 tax year   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. Turbotax for 2010 tax year You must meet the requirements explained earlier under Related property voluntarily sold. Turbotax for 2010 tax year You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). Turbotax for 2010 tax year Buying replacement property from a related person. Turbotax for 2010 tax year   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Turbotax for 2010 tax year For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Turbotax for 2010 tax year   This rule applies to the following taxpayers. Turbotax for 2010 tax year C corporations. Turbotax for 2010 tax year Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Turbotax for 2010 tax year All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. Turbotax for 2010 tax year   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Turbotax for 2010 tax year If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Turbotax for 2010 tax year If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Turbotax for 2010 tax year Exception. Turbotax for 2010 tax year   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Turbotax for 2010 tax year Advance payment. Turbotax for 2010 tax year   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). Turbotax for 2010 tax year Replacement property. Turbotax for 2010 tax year   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Turbotax for 2010 tax year You do not have to use the actual funds from the condemnation award to acquire the replacement property. Turbotax for 2010 tax year Property you acquire by gift or inheritance does not qualify as replacement property. Turbotax for 2010 tax year Similar or related in service or use. Turbotax for 2010 tax year   Your replacement property must be similar or related in service or use to the property it replaces. Turbotax for 2010 tax year   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. Turbotax for 2010 tax year For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Turbotax for 2010 tax year Owner-user. Turbotax for 2010 tax year   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Turbotax for 2010 tax year Your replacement property is not similar or related in service or use to the condemned property. Turbotax for 2010 tax year To be similar or related in service or use, your replacement property must also be used by you as your home. Turbotax for 2010 tax year Owner-investor. Turbotax for 2010 tax year   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. Turbotax for 2010 tax year You decide this by determining all the following information. Turbotax for 2010 tax year Whether the properties are of similar service to you. Turbotax for 2010 tax year The nature of the business risks connected with the properties. Turbotax for 2010 tax year What the properties demand of you in the way of management, service, and relations to your tenants. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year You owned land and a building you rented to a manufacturing company. Turbotax for 2010 tax year The building was condemned. Turbotax for 2010 tax year During the replacement period, you had a new building built on other land you already owned. Turbotax for 2010 tax year You rented out the new building for use as a wholesale grocery warehouse. Turbotax for 2010 tax year The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. Turbotax for 2010 tax year Your management activities. Turbotax for 2010 tax year The amount and kind of services you provide to your tenants. Turbotax for 2010 tax year The nature of your business risks connected with the properties. Turbotax for 2010 tax year Leasehold replaced with fee simple property. Turbotax for 2010 tax year   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. Turbotax for 2010 tax year   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. Turbotax for 2010 tax year A leasehold is property held under a lease, usually for a term of years. Turbotax for 2010 tax year Outdoor advertising display replaced with real property. Turbotax for 2010 tax year   You can elect to treat an outdoor advertising display as real property. Turbotax for 2010 tax year If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. Turbotax for 2010 tax year For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. Turbotax for 2010 tax year   You can make this election only if you did not claim a section 179 deduction for the display. Turbotax for 2010 tax year You cannot cancel this election unless you get the consent of the IRS. Turbotax for 2010 tax year   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. Turbotax for 2010 tax year Substituting replacement property. Turbotax for 2010 tax year   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Turbotax for 2010 tax year But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Turbotax for 2010 tax year Controlling interest in a corporation. Turbotax for 2010 tax year   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. Turbotax for 2010 tax year You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. Turbotax for 2010 tax year Basis adjustment to corporation's property. Turbotax for 2010 tax year   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Turbotax for 2010 tax year You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). Turbotax for 2010 tax year   Allocate this reduction to the following classes of property in the order shown below. Turbotax for 2010 tax year Property that is similar or related in service or use to the condemned property. Turbotax for 2010 tax year Depreciable property not reduced in (1). Turbotax for 2010 tax year All other property. Turbotax for 2010 tax year If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. Turbotax for 2010 tax year The reduced basis of any single property cannot be less than zero. Turbotax for 2010 tax year Main home replaced. Turbotax for 2010 tax year   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. Turbotax for 2010 tax year The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Turbotax for 2010 tax year   You must reduce the basis of your replacement property by the postponed gain. Turbotax for 2010 tax year Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Turbotax for 2010 tax year The city paid you a condemnation award of $400,000. Turbotax for 2010 tax year Your adjusted basis in the property was $80,000. Turbotax for 2010 tax year You realize a gain of $320,000 ($400,000 − $80,000). Turbotax for 2010 tax year You purchased a new home for $100,000. Turbotax for 2010 tax year You can exclude $250,000 of the realized gain from your gross income. Turbotax for 2010 tax year The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). Turbotax for 2010 tax year You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Turbotax for 2010 tax year The remaining $20,000 of realized gain is postponed. Turbotax for 2010 tax year Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Turbotax for 2010 tax year Replacement period. Turbotax for 2010 tax year   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Turbotax for 2010 tax year This is the replacement period. Turbotax for 2010 tax year   The replacement period for a condemnation begins on the earlier of the following dates. Turbotax for 2010 tax year The date on which you disposed of the condemned property. Turbotax for 2010 tax year The date on which the threat of condemnation began. Turbotax for 2010 tax year   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Turbotax for 2010 tax year However, see the exceptions below. Turbotax for 2010 tax year Three-year replacement period for certain property. Turbotax for 2010 tax year   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Turbotax for 2010 tax year However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. Turbotax for 2010 tax year Five-year replacement period for certain property. Turbotax for 2010 tax year   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. Turbotax for 2010 tax year Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. Turbotax for 2010 tax year Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. Turbotax for 2010 tax year Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Turbotax for 2010 tax year Extended replacement period for taxpayers affected by other federally declared disasters. Turbotax for 2010 tax year    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. Turbotax for 2010 tax year For more information visit www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/uac/Tax-Relief-in-Disaster-Situations. Turbotax for 2010 tax year Weather-related sales of livestock in an area eligible for federal assistance. Turbotax for 2010 tax year   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Turbotax for 2010 tax year    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. Turbotax for 2010 tax year See Notice 2006-82. Turbotax for 2010 tax year You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/irb/2006-39_IRB/ar13. Turbotax for 2010 tax year html. Turbotax for 2010 tax year    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Turbotax for 2010 tax year If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. Turbotax for 2010 tax year You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Turbotax for 2010 tax year irs. Turbotax for 2010 tax year gov/irb/2013-45_IRB/ar04. Turbotax for 2010 tax year html. Turbotax for 2010 tax year The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Turbotax for 2010 tax year Determining when gain is realized. Turbotax for 2010 tax year   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Turbotax for 2010 tax year If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. Turbotax for 2010 tax year   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Turbotax for 2010 tax year A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. Turbotax for 2010 tax year   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Turbotax for 2010 tax year All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Turbotax for 2010 tax year All or part of the award is actually or constructively received. Turbotax for 2010 tax year For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. Turbotax for 2010 tax year Replacement property bought before the condemnation. Turbotax for 2010 tax year   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. Turbotax for 2010 tax year Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Turbotax for 2010 tax year Example. Turbotax for 2010 tax year On April 3, 2012, city authorities notified you that your property would be condemned. Turbotax for 2010 tax year On June 5, 2012, you acquired property to replace the property to be condemned. Turbotax for 2010 tax year You still had the new property when the city took possession of your old property on September 4, 2013. Turbotax for 2010 tax year You have made a replacement within the replacement period. Turbotax for 2010 tax year Extension. Turbotax for 2010 tax year   You can request an extension of the replacement period from the IRS director for your area. Turbotax for 2010 tax year You should apply before the end of the replacement period. Turbotax for 2010 tax year Your request should explain in detail why you need an extension. Turbotax for 2010 tax year The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Turbotax for 2010 tax year An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Turbotax for 2010 tax year   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Turbotax for 2010 tax year Extensions are usually limited to a period of 1 year or less. Turbotax for 2010 tax year The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Turbotax for 2010 tax year If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri