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Where Can I File 2012 Taxes

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Where Can I File 2012 Taxes

Where can i file 2012 taxes Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. Where can i file 2012 taxes Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. Where can i file 2012 taxes Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. Where can i file 2012 taxes Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. Where can i file 2012 taxes However, a joint undertaking merely to share expenses is not a partnership. Where can i file 2012 taxes For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. Where can i file 2012 taxes The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. Where can i file 2012 taxes Organizations formed after 1996. Where can i file 2012 taxes   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. Where can i file 2012 taxes An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. Where can i file 2012 taxes An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. Where can i file 2012 taxes An insurance company. Where can i file 2012 taxes Certain banks. Where can i file 2012 taxes An organization wholly owned by a state, local, or foreign government. Where can i file 2012 taxes An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Where can i file 2012 taxes Certain foreign organizations identified in section 301. Where can i file 2012 taxes 7701-2(b)(8) of the regulations. Where can i file 2012 taxes A tax-exempt organization. Where can i file 2012 taxes A real estate investment trust. Where can i file 2012 taxes An organization classified as a trust under section 301. Where can i file 2012 taxes 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. Where can i file 2012 taxes Any other organization that elects to be classified as a corporation by filing Form 8832. Where can i file 2012 taxes For more information, see the instructions for Form 8832. Where can i file 2012 taxes Limited liability company. Where can i file 2012 taxes   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Where can i file 2012 taxes Unlike a partnership, none of the members of an LLC are personally liable for its debts. Where can i file 2012 taxes An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. Where can i file 2012 taxes 7701-3. Where can i file 2012 taxes See Form 8832 and section 301. Where can i file 2012 taxes 7701-3 of the regulations for more details. Where can i file 2012 taxes A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. Where can i file 2012 taxes Organizations formed before 1997. Where can i file 2012 taxes   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. Where can i file 2012 taxes Community property. Where can i file 2012 taxes    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. Where can i file 2012 taxes They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. Where can i file 2012 taxes A change in reporting position will be treated for federal tax purposes as a conversion of the entity. Where can i file 2012 taxes   A qualified entity is a business entity that meets all the following requirements. Where can i file 2012 taxes The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. Where can i file 2012 taxes No person other than one or both spouses would be considered an owner for federal tax purposes. Where can i file 2012 taxes The business entity is not treated as a corporation. Where can i file 2012 taxes   For more information about community property, see Publication 555, Community Property. Where can i file 2012 taxes Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Where can i file 2012 taxes Family Partnership Members of a family can be partners. Where can i file 2012 taxes However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. Where can i file 2012 taxes If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. Where can i file 2012 taxes If capital is not a material income-producing factor, they joined together in good faith to conduct a business. Where can i file 2012 taxes They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. Where can i file 2012 taxes Capital is material. Where can i file 2012 taxes   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. Where can i file 2012 taxes Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. Where can i file 2012 taxes Capital is not material. Where can i file 2012 taxes   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. Where can i file 2012 taxes Capital interest. Where can i file 2012 taxes   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. Where can i file 2012 taxes The owner withdraws from the partnership. Where can i file 2012 taxes The partnership liquidates. Where can i file 2012 taxes   The mere right to share in earnings and profits is not a capital interest in the partnership. Where can i file 2012 taxes Gift of capital interest. Where can i file 2012 taxes   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. Where can i file 2012 taxes It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. Where can i file 2012 taxes The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. Where can i file 2012 taxes Purchase. Where can i file 2012 taxes   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. Where can i file 2012 taxes The fair market value of the purchased interest is considered donated capital. Where can i file 2012 taxes For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). Where can i file 2012 taxes Example. Where can i file 2012 taxes A father sold 50% of his business to his son. Where can i file 2012 taxes The resulting partnership had a profit of $60,000. Where can i file 2012 taxes Capital is a material income-producing factor. Where can i file 2012 taxes The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. Where can i file 2012 taxes The $24,000 must be allocated to the father as compensation. Where can i file 2012 taxes Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. Where can i file 2012 taxes The son's share of partnership profit cannot be more than $18,000. Where can i file 2012 taxes Business owned and operated by spouses. Where can i file 2012 taxes   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. Where can i file 2012 taxes If so, they should report income or loss from the business on Form 1065. Where can i file 2012 taxes They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. Where can i file 2012 taxes However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. Where can i file 2012 taxes Qualified Joint Venture Election. Where can i file 2012 taxes   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. Where can i file 2012 taxes A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. Where can i file 2012 taxes   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. Where can i file 2012 taxes All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. Where can i file 2012 taxes Each spouse takes into account his or her respective share of these items as a sole proprietor. Where can i file 2012 taxes Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). Where can i file 2012 taxes For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. Where can i file 2012 taxes e. Where can i file 2012 taxes , based on their respective interests in the venture). Where can i file 2012 taxes   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. Where can i file 2012 taxes Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. Where can i file 2012 taxes   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. Where can i file 2012 taxes However, this may not be true if either spouse exceeds the social security tax limitation. Where can i file 2012 taxes   For more information on qualified joint ventures, go to IRS. Where can i file 2012 taxes gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. Where can i file 2012 taxes ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. Where can i file 2012 taxes The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. Where can i file 2012 taxes The agreement or modifications can be oral or written. Where can i file 2012 taxes Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. Where can i file 2012 taxes This filing date does not include any extension of time. Where can i file 2012 taxes If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. Where can i file 2012 taxes Terminating a Partnership A partnership terminates when one of the following events takes place. Where can i file 2012 taxes All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. Where can i file 2012 taxes At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. Where can i file 2012 taxes Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. Where can i file 2012 taxes See section 1. Where can i file 2012 taxes 708-1(b) of the regulations for more information on the termination of a partnership. Where can i file 2012 taxes For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. Where can i file 2012 taxes 708-1(c) and 1. Where can i file 2012 taxes 708-1(d) of the regulations. Where can i file 2012 taxes Date of termination. Where can i file 2012 taxes   The partnership's tax year ends on the date of termination. Where can i file 2012 taxes For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. Where can i file 2012 taxes For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. Where can i file 2012 taxes Short period return. Where can i file 2012 taxes   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. Where can i file 2012 taxes The return is due the 15th day of the fourth month following the date of termination. Where can i file 2012 taxes See Partnership Return (Form 1065), later, for information about filing Form 1065. Where can i file 2012 taxes Conversion of partnership into limited liability company (LLC). Where can i file 2012 taxes   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. Where can i file 2012 taxes The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. Where can i file 2012 taxes   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. Where can i file 2012 taxes Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. Where can i file 2012 taxes If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. Where can i file 2012 taxes For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. Where can i file 2012 taxes   The same rules apply if an LLC classified as a partnership is converted into a partnership. Where can i file 2012 taxes IRS e-file (Electronic Filing) Please click here for the text description of the image. Where can i file 2012 taxes e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). Where can i file 2012 taxes Other partnerships generally have the option to file electronically. Where can i file 2012 taxes For details about IRS e-file, see the Form 1065 instructions. Where can i file 2012 taxes Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. Where can i file 2012 taxes All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. Where can i file 2012 taxes However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. Where can i file 2012 taxes Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. Where can i file 2012 taxes Investing partnership. Where can i file 2012 taxes   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. Where can i file 2012 taxes They own the property as co-owners. Where can i file 2012 taxes They reserve the right separately to take or dispose of their shares of any property acquired or retained. Where can i file 2012 taxes They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. Where can i file 2012 taxes Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. Where can i file 2012 taxes Operating agreement partnership. Where can i file 2012 taxes   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. Where can i file 2012 taxes They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. Where can i file 2012 taxes They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. Where can i file 2012 taxes They do not jointly sell services or the property produced or extracted. Where can i file 2012 taxes Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. Where can i file 2012 taxes However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. Where can i file 2012 taxes Electing the exclusion. Where can i file 2012 taxes   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. Where can i file 2012 taxes This filing date includes any extension of time. Where can i file 2012 taxes See Regulations section 1. Where can i file 2012 taxes 761-2(b) for the procedures to follow. Where can i file 2012 taxes Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. Where can i file 2012 taxes The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. Where can i file 2012 taxes The return must be signed by a general partner. Where can i file 2012 taxes If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. Where can i file 2012 taxes A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. Where can i file 2012 taxes See the Instructions for Form 1065 for more information about who must file Form 1065. Where can i file 2012 taxes Partnership Distributions Partnership distributions include the following. Where can i file 2012 taxes A withdrawal by a partner in anticipation of the current year's earnings. Where can i file 2012 taxes A distribution of the current year's or prior years' earnings not needed for working capital. Where can i file 2012 taxes A complete or partial liquidation of a partner's interest. Where can i file 2012 taxes A distribution to all partners in a complete liquidation of the partnership. Where can i file 2012 taxes A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. Where can i file 2012 taxes If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. Where can i file 2012 taxes Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. Where can i file 2012 taxes Effect on partner's basis. Where can i file 2012 taxes   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. Where can i file 2012 taxes See Adjusted Basis under Basis of Partner's Interest, later. Where can i file 2012 taxes Effect on partnership. Where can i file 2012 taxes   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. Where can i file 2012 taxes The partnership may be able to elect to adjust the basis of its undistributed property. Where can i file 2012 taxes Certain distributions treated as a sale or exchange. Where can i file 2012 taxes   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. Where can i file 2012 taxes Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. Where can i file 2012 taxes Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. Where can i file 2012 taxes   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Where can i file 2012 taxes   This treatment does not apply to the following distributions. Where can i file 2012 taxes A distribution of property to the partner who contributed the property to the partnership. Where can i file 2012 taxes Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. Where can i file 2012 taxes Substantially appreciated inventory items. Where can i file 2012 taxes   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. Where can i file 2012 taxes However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. Where can i file 2012 taxes Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. Where can i file 2012 taxes Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. Where can i file 2012 taxes If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. Where can i file 2012 taxes For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. Where can i file 2012 taxes Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Where can i file 2012 taxes Example. Where can i file 2012 taxes The adjusted basis of Jo's partnership interest is $14,000. Where can i file 2012 taxes She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. Where can i file 2012 taxes Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. Where can i file 2012 taxes Any gain on the land will be recognized when she sells or otherwise disposes of it. Where can i file 2012 taxes The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. Where can i file 2012 taxes Marketable securities treated as money. Where can i file 2012 taxes   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. Where can i file 2012 taxes This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. Where can i file 2012 taxes   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). Where can i file 2012 taxes   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. Where can i file 2012 taxes Loss on distribution. Where can i file 2012 taxes   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. Where can i file 2012 taxes The adjusted basis of the partner's interest in the partnership exceeds the distribution. Where can i file 2012 taxes The partner's entire interest in the partnership is liquidated. Where can i file 2012 taxes The distribution is in money, unrealized receivables, or inventory items. Where can i file 2012 taxes   There are exceptions to these general rules. Where can i file 2012 taxes See the following discussions. Where can i file 2012 taxes Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. Where can i file 2012 taxes Distribution of partner's debt. Where can i file 2012 taxes   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). Where can i file 2012 taxes   The partner is treated as having satisfied the debt for its fair market value. Where can i file 2012 taxes If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. Where can i file 2012 taxes   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. Where can i file 2012 taxes Net precontribution gain. Where can i file 2012 taxes   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. Where can i file 2012 taxes   The gain recognized is the lesser of the following amounts. Where can i file 2012 taxes The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. Where can i file 2012 taxes The “net precontribution gain” of the partner. Where can i file 2012 taxes This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. Where can i file 2012 taxes For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. Where can i file 2012 taxes   The character of the gain is determined by reference to the character of the net precontribution gain. Where can i file 2012 taxes This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. Where can i file 2012 taxes For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. Where can i file 2012 taxes Effect on basis. Where can i file 2012 taxes   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. Where can i file 2012 taxes Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. Where can i file 2012 taxes See Basis of Partner's Interest , later. Where can i file 2012 taxes   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. Where can i file 2012 taxes Exceptions. Where can i file 2012 taxes   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. Where can i file 2012 taxes For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. Where can i file 2012 taxes   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. Where can i file 2012 taxes Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. Where can i file 2012 taxes However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Where can i file 2012 taxes Example 1. Where can i file 2012 taxes The adjusted basis of Emily's partnership interest is $30,000. Where can i file 2012 taxes She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. Where can i file 2012 taxes Her basis for the property is $20,000. Where can i file 2012 taxes Example 2. Where can i file 2012 taxes The adjusted basis of Steve's partnership interest is $10,000. Where can i file 2012 taxes He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. Where can i file 2012 taxes His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). Where can i file 2012 taxes Complete liquidation of partner's interest. Where can i file 2012 taxes   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. Where can i file 2012 taxes Partner's holding period. Where can i file 2012 taxes   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. Where can i file 2012 taxes If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. Where can i file 2012 taxes Basis divided among properties. Where can i file 2012 taxes   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. Where can i file 2012 taxes For property distributed after August 5, 1997, allocate the basis using the following rules. Where can i file 2012 taxes Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. Where can i file 2012 taxes If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Where can i file 2012 taxes Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. Where can i file 2012 taxes If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. Where can i file 2012 taxes If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Where can i file 2012 taxes Allocating a basis increase. Where can i file 2012 taxes   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. Where can i file 2012 taxes If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. Where can i file 2012 taxes Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. Where can i file 2012 taxes Example. Where can i file 2012 taxes Eun's basis in her partnership interest is $55,000. Where can i file 2012 taxes In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. Where can i file 2012 taxes Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. Where can i file 2012 taxes Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. Where can i file 2012 taxes To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). Where can i file 2012 taxes This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). Where can i file 2012 taxes She first allocates $35,000 to property A (its unrealized appreciation). Where can i file 2012 taxes The remaining $5,000 is allocated between the properties based on their fair market values. Where can i file 2012 taxes $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. Where can i file 2012 taxes Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). Where can i file 2012 taxes Allocating a basis decrease. Where can i file 2012 taxes   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. Where can i file 2012 taxes Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. Where can i file 2012 taxes If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. Where can i file 2012 taxes Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). Where can i file 2012 taxes Example. Where can i file 2012 taxes Armando's basis in his partnership interest is $20,000. Where can i file 2012 taxes In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. Where can i file 2012 taxes Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. Where can i file 2012 taxes Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. Where can i file 2012 taxes To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). Where can i file 2012 taxes This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). Where can i file 2012 taxes He allocates the entire $10,000 to property D (its unrealized depreciation). Where can i file 2012 taxes Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). Where can i file 2012 taxes Distributions before August 6, 1997. Where can i file 2012 taxes   For property distributed before August 6, 1997, allocate the basis using the following rules. Where can i file 2012 taxes Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. Where can i file 2012 taxes If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. Where can i file 2012 taxes Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. Where can i file 2012 taxes Partner's interest more than partnership basis. Where can i file 2012 taxes   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. Where can i file 2012 taxes Special adjustment to basis. Where can i file 2012 taxes   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. Where can i file 2012 taxes To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. Where can i file 2012 taxes Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. Where can i file 2012 taxes   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. Where can i file 2012 taxes However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. Where can i file 2012 taxes   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. Where can i file 2012 taxes If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. Where can i file 2012 taxes   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. Where can i file 2012 taxes The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. Where can i file 2012 taxes Example. Where can i file 2012 taxes Chin Ho purchased a 25% interest in X partnership for $17,000 cash. Where can i file 2012 taxes At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. Where can i file 2012 taxes Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. Where can i file 2012 taxes Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. Where can i file 2012 taxes The value of the inventory received was 25% of the value of all partnership inventory. Where can i file 2012 taxes (It is immaterial whether the inventory he received was on hand when he acquired his interest. Where can i file 2012 taxes ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. Where can i file 2012 taxes His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). Where can i file 2012 taxes The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. Where can i file 2012 taxes The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). Where can i file 2012 taxes His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). Where can i file 2012 taxes The remaining $11,500 is allocated to his new basis for the other property he received. Where can i file 2012 taxes Mandatory adjustment. Where can i file 2012 taxes   A partner does not always have a choice of making this special adjustment to basis. Where can i file 2012 taxes The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. Where can i file 2012 taxes The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. Where can i file 2012 taxes If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. Where can i file 2012 taxes The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. Where can i file 2012 taxes Required statement. Where can i file 2012 taxes   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. Where can i file 2012 taxes The statement must provide information necessary for the partner to compute the special basis adjustment. Where can i file 2012 taxes Marketable securities. Where can i file 2012 taxes   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. Where can i file 2012 taxes See Marketable securities treated as money under Partner's Gain or Loss, earlier. Where can i file 2012 taxes The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. Where can i file 2012 taxes Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. Where can i file 2012 taxes These transactions include the following. Where can i file 2012 taxes Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. Where can i file 2012 taxes Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. Where can i file 2012 taxes Payments by accrual basis partnership to cash basis partner. Where can i file 2012 taxes   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. Where can i file 2012 taxes However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. Where can i file 2012 taxes Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. Where can i file 2012 taxes A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. Where can i file 2012 taxes This treatment is for purposes of determining gross income and deductible business expenses only. Where can i file 2012 taxes For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. Where can i file 2012 taxes Guaranteed payments are not subject to income tax withholding. Where can i file 2012 taxes The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. Where can i file 2012 taxes They are also listed on Schedules K and K-1 of the partnership return. Where can i file 2012 taxes The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. Where can i file 2012 taxes Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. Where can i file 2012 taxes Generally, organizational and syndication expenses are not deductible by the partnership. Where can i file 2012 taxes However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). Where can i file 2012 taxes Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. Where can i file 2012 taxes Minimum payment. Where can i file 2012 taxes   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. Where can i file 2012 taxes Example. Where can i file 2012 taxes Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. Where can i file 2012 taxes The partnership has net income of $20,000. Where can i file 2012 taxes Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). Where can i file 2012 taxes The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). Where can i file 2012 taxes Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. Where can i file 2012 taxes If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. Where can i file 2012 taxes Self-employed health insurance premiums. Where can i file 2012 taxes   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. Where can i file 2012 taxes The partnership can deduct the payments as a business expense, and the partner must include them in gross income. Where can i file 2012 taxes However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. Where can i file 2012 taxes   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. Where can i file 2012 taxes The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. Where can i file 2012 taxes For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. Where can i file 2012 taxes Including payments in partner's income. Where can i file 2012 taxes   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. Where can i file 2012 taxes Example 1. Where can i file 2012 taxes Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. Where can i file 2012 taxes Her distributive share of the partnership income is 10%. Where can i file 2012 taxes The partnership has $50,000 of ordinary income after deducting the guaranteed payment. Where can i file 2012 taxes She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. Where can i file 2012 taxes Example 2. Where can i file 2012 taxes Lamont is a calendar year taxpayer who is a partner in a partnership. Where can i file 2012 taxes The partnership uses a fiscal year that ended January 31, 2013. Where can i file 2012 taxes Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. Where can i file 2012 taxes He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. Where can i file 2012 taxes Payments resulting in loss. Where can i file 2012 taxes   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. Where can i file 2012 taxes The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. Where can i file 2012 taxes Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. Where can i file 2012 taxes Losses. Where can i file 2012 taxes   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. Where can i file 2012 taxes   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. Where can i file 2012 taxes   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. Where can i file 2012 taxes   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. Where can i file 2012 taxes If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. Where can i file 2012 taxes Gains. Where can i file 2012 taxes   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. Where can i file 2012 taxes More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). Where can i file 2012 taxes The property in the hands of the transferee immediately after the transfer is not a capital asset. Where can i file 2012 taxes Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. Where can i file 2012 taxes More than 50% ownership. Where can i file 2012 taxes   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. Where can i file 2012 taxes An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. Where can i file 2012 taxes An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. Where can i file 2012 taxes For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. Where can i file 2012 taxes If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. Where can i file 2012 taxes However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. Where can i file 2012 taxes Example. Where can i file 2012 taxes Individuals A and B and Trust T are equal partners in Partnership ABT. Where can i file 2012 taxes A's husband, AH, is the sole beneficiary of Trust T. Where can i file 2012 taxes Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. Where can i file 2012 taxes As a result, A is a more-than-50% partner. Where can i file 2012 taxes This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. Where can i file 2012 taxes More information. Where can i file 2012 taxes   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Where can i file 2012 taxes Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. Where can i file 2012 taxes This applies whether a partnership is being formed or is already operating. Where can i file 2012 taxes The partnership's holding period for the property includes the partner's holding period. Where can i file 2012 taxes The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. Where can i file 2012 taxes The exchange is not subject to the rules explained later under Disposition of Partner's Interest. Where can i file 2012 taxes Disguised sales. Where can i file 2012 taxes   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. Where can i file 2012 taxes The distribution would not have been made but for the contribution. Where can i file 2012 taxes The partner's right to the distribution does not depend on the success of partnership operations. Where can i file 2012 taxes   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. Where can i file 2012 taxes However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. Where can i file 2012 taxes If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. Where can i file 2012 taxes Form 8275 required. Where can i file 2012 taxes   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. Where can i file 2012 taxes For exceptions to this requirement, see section 1. Where can i file 2012 taxes 707-3(c)(2) of the regulations. Where can i file 2012 taxes   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. Where can i file 2012 taxes   Form 8275 must include the following information. Where can i file 2012 taxes A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. Where can i file 2012 taxes A description of the transferred property or money, including its value. Where can i file 2012 taxes A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. Where can i file 2012 taxes See section 1. Where can i file 2012 taxes 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. Where can i file 2012 taxes Contribution to partnership treated as investment company. Where can i file 2012 taxes   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. Where can i file 2012 taxes   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. Where can i file 2012 taxes These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. Where can i file 2012 taxes For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. Where can i file 2012 taxes Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. Where can i file 2012 taxes   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. Where can i file 2012 taxes Contribution to foreign partnership. Where can i file 2012 taxes   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. Where can i file 2012 taxes Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. Where can i file 2012 taxes The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. Where can i file 2012 taxes   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. Where can i file 2012 taxes See the form instructions for more information. Where can i file 2012 taxes Basis of contributed property. Where can i file 2012 taxes   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. Where can i file 2012 taxes Allocations to account for built-in gain or loss. Where can i file 2012 taxes   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. Where can i file 2012 taxes The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. Where can i file 2012 taxes This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. Where can i file 2012 taxes   The partnership can use different allocation methods for different items of contributed property. Where can i file 2012 taxes A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. Where can i file 2012 taxes See section 1. Where can i file 2012 taxes 704-3 of the regulations for allocation methods generally considered reasonable. Where can i file 2012 taxes   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. Where can i file 2012 taxes If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. Where can i file 2012 taxes However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. Where can i file 2012 taxes Example. Where can i file 2012 taxes Areta and Sofia formed an equal partnership. Where can i file 2012 taxes Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. Where can i file 2012 taxes The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. Where can i file 2012 taxes In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. Where can i file 2012 taxes Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. Where can i file 2012 taxes To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. Where can i file 2012 taxes However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. Where can i file 2012 taxes The entire $400 must be allocated to Areta. Where can i file 2012 taxes Distribution of contributed property to another partner. Where can i file 2012 taxes   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. Where can i file 2012 taxes   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. Where can i file 2012 taxes This amount is the difference between the property's basis and its fair market value at the time of contribution. Where can i file 2012 taxes The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. Where can i file 2012 taxes Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. Where can i file 2012 taxes Disposition of certain contributed property. Where can i file 2012 taxes   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. Where can i file 2012 taxes Unrealized receivables. Where can i file 2012 taxes If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. Where can i file 2012 taxes Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. Where can i file 2012 taxes When reading the definition, substitute “partner” for “partnership. Where can i file 2012 taxes ” Inventory items. Where can i file 2012 taxes If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. Where can i file 2012 taxes Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. Where can i file 2012 taxes Capital loss property. Where can i file 2012 taxes If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. Where can i file 2012 taxes The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. Where can i file 2012 taxes Substituted basis property. Where can i file 2012 taxes If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. Where can i file 2012 taxes Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. Where can i file 2012 taxes Capital interest. Where can i file 2012 taxes   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. Where can i file 2012 taxes This determination generally is made at the time of receipt of the partnership interest. Where can i file 2012 taxes The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. Where can i file 2012 taxes The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. Where can i file 2012 taxes   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. Where can i file 2012 taxes Profits interest. Where can i file 2012 taxes   A profits interest is a partnership interest other than a capital interest. Where can i file 2012 taxes If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. Where can i file 2012 taxes However, this does not apply in the following situations. Where can i file 2012 taxes The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. Where can i file 2012 taxes Within 2 years of receipt, the partner disposes of the profits interest. Where can i file 2012 taxes The profits interest is a limited partnership interest in a publicly traded partnership. Where can i file 2012 taxes   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. Where can i file 2012 taxes Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. Where can i file 2012 taxes If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. Where can i file 2012 taxes Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. Where can i file 2012 taxes Interest acquired by gift, etc. Where can i file 2012 taxes   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. Where can i file 2012 taxes Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). Where can i file 2012 taxes The basis of an interest in a partnership is increased or decreased by certain items. Where can i file 2012 taxes Increases. Where can i file 2012 taxes   A partner's basis is increased by the following items. Where can i file 2012 taxes The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. Where can i file 2012 taxes The partner's distributive share of taxable and nontaxable partnership income. Where can i file 2012 taxes The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. Where can i file 2012 taxes Decreases. Where can i file 2012 taxes   The partner's basis is decreased (but never below zero) by the following items. Where can i file 2012 taxes The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. Where can i file 2012 taxes The partner's distributive share of the partnership losses (including capital losses). Where can i file 2012 taxes The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. Where can i file 2012 taxes This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. Where can i file 2012 taxes The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. Where can i file 2012 taxes Partner's liabilities assumed by partnership. Where can i file 2012 taxes   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. Where can i file 2012 taxes This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. Where can i file 2012 taxes The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. Where can i file 2012 taxes See Effect of Partnership Liabilities , later. Where can i file 2012 taxes Example 1. Where can i file 2012 taxes Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. Where can i file 2012 taxes The partnership assumed payment of the mortgage. Where can i file 2012 taxes The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. Where can i file 2012 taxes If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. Where can i file 2012 taxes The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. Where can i file 2012 taxes However, this gain would not increase the basis of his partnership interest. Where can i file 2012 taxes Book value of partner's interest. Where can i file 2012 taxes   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. Where can i file 2012 taxes Example. Where can i file 2012 taxes Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. Where can i file 2012 taxes His partner contributes $1,000 cash. Where can i file 2012 taxes While each partner has increased his capital account by $1,000, which will be re
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The Where Can I File 2012 Taxes

Where can i file 2012 taxes 4. Where can i file 2012 taxes   Transportation Table of Contents Parking fees. Where can i file 2012 taxes Advertising display on car. Where can i file 2012 taxes Car pools. Where can i file 2012 taxes Hauling tools or instruments. Where can i file 2012 taxes Union members' trips from a union hall. Where can i file 2012 taxes Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Where can i file 2012 taxes These expenses include the cost of transportation by air, rail, bus, taxi, etc. Where can i file 2012 taxes , and the cost of driving and maintaining your car. Where can i file 2012 taxes Transportation expenses include the ordinary and necessary costs of all of the following. Where can i file 2012 taxes Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Where can i file 2012 taxes Tax home is defined in chapter 1. Where can i file 2012 taxes Visiting clients or customers. Where can i file 2012 taxes Going to a business meeting away from your regular workplace. Where can i file 2012 taxes Getting from your home to a temporary workplace when you have one or more regular places of work. Where can i file 2012 taxes These temporary workplaces can be either within the area of your tax home or outside that area. Where can i file 2012 taxes Transportation expenses do not include expenses you have while traveling away from home overnight. Where can i file 2012 taxes Those expenses are travel expenses discussed in chapter 1 . Where can i file 2012 taxes However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Where can i file 2012 taxes See Car Expenses , later. Where can i file 2012 taxes Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Where can i file 2012 taxes However, there may be exceptions to this general rule. Where can i file 2012 taxes You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Where can i file 2012 taxes Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Where can i file 2012 taxes Illustration of transportation expenses. Where can i file 2012 taxes    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Where can i file 2012 taxes You may want to refer to it when deciding whether you can deduct your transportation expenses. Where can i file 2012 taxes Temporary work location. Where can i file 2012 taxes   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Where can i file 2012 taxes   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Where can i file 2012 taxes   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Where can i file 2012 taxes   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Where can i file 2012 taxes It will not be treated as temporary after the date you determine it will last more than 1 year. Where can i file 2012 taxes   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Where can i file 2012 taxes You may have deductible travel expenses as discussed in chapter 1 . Where can i file 2012 taxes No regular place of work. Where can i file 2012 taxes   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Where can i file 2012 taxes   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Where can i file 2012 taxes   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Where can i file 2012 taxes These are nondeductible commuting expenses. Where can i file 2012 taxes Two places of work. Where can i file 2012 taxes   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Where can i file 2012 taxes However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Where can i file 2012 taxes   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Where can i file 2012 taxes You cannot deduct them. Where can i file 2012 taxes Armed Forces reservists. Where can i file 2012 taxes   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Where can i file 2012 taxes You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Where can i file 2012 taxes   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Where can i file 2012 taxes In this case, your transportation generally is a nondeductible commuting expense. Where can i file 2012 taxes However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Where can i file 2012 taxes   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Where can i file 2012 taxes   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Where can i file 2012 taxes These expenses are discussed in chapter 1 . Where can i file 2012 taxes   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Where can i file 2012 taxes For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Where can i file 2012 taxes Commuting expenses. Where can i file 2012 taxes   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Where can i file 2012 taxes These costs are personal commuting expenses. Where can i file 2012 taxes You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Where can i file 2012 taxes You cannot deduct commuting expenses even if you work during the commuting trip. Where can i file 2012 taxes Example. Where can i file 2012 taxes You sometimes use your cell phone to make business calls while commuting to and from work. Where can i file 2012 taxes Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Where can i file 2012 taxes These activities do not change the trip from personal to business. Where can i file 2012 taxes You cannot deduct your commuting expenses. Where can i file 2012 taxes Parking fees. Where can i file 2012 taxes    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Where can i file 2012 taxes You can, however, deduct business-related parking fees when visiting a customer or client. Where can i file 2012 taxes Advertising display on car. Where can i file 2012 taxes   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Where can i file 2012 taxes If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Where can i file 2012 taxes Car pools. Where can i file 2012 taxes   You cannot deduct the cost of using your car in a nonprofit car pool. Where can i file 2012 taxes Do not include payments you receive from the passengers in your income. Where can i file 2012 taxes These payments are considered reimbursements of your expenses. Where can i file 2012 taxes However, if you operate a car pool for a profit, you must include payments from passengers in your income. Where can i file 2012 taxes You can then deduct your car expenses (using the rules in this publication). Where can i file 2012 taxes Hauling tools or instruments. Where can i file 2012 taxes   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Where can i file 2012 taxes However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Where can i file 2012 taxes Union members' trips from a union hall. Where can i file 2012 taxes   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Where can i file 2012 taxes Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Where can i file 2012 taxes Office in the home. Where can i file 2012 taxes   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Where can i file 2012 taxes (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Where can i file 2012 taxes ) Examples of deductible transportation. Where can i file 2012 taxes   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Where can i file 2012 taxes Example 1. Where can i file 2012 taxes You regularly work in an office in the city where you live. Where can i file 2012 taxes Your employer sends you to a 1-week training session at a different office in the same city. Where can i file 2012 taxes You travel directly from your home to the training location and return each day. Where can i file 2012 taxes You can deduct the cost of your daily round-trip transportation between your home and the training location. Where can i file 2012 taxes Example 2. Where can i file 2012 taxes Your principal place of business is in your home. Where can i file 2012 taxes You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Where can i file 2012 taxes Example 3. Where can i file 2012 taxes You have no regular office, and you do not have an office in your home. Where can i file 2012 taxes In this case, the location of your first business contact inside the metropolitan area is considered your office. Where can i file 2012 taxes Transportation expenses between your home and this first contact are nondeductible commuting expenses. Where can i file 2012 taxes Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Where can i file 2012 taxes While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Where can i file 2012 taxes Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Where can i file 2012 taxes You generally can use one of the two following methods to figure your deductible expenses. Where can i file 2012 taxes Standard mileage rate. Where can i file 2012 taxes Actual car expenses. Where can i file 2012 taxes If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Where can i file 2012 taxes See Leasing a Car , later. Where can i file 2012 taxes In this publication, “car” includes a van, pickup, or panel truck. Where can i file 2012 taxes For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Where can i file 2012 taxes Rural mail carriers. Where can i file 2012 taxes   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Where can i file 2012 taxes Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Where can i file 2012 taxes   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Where can i file 2012 taxes You must complete Form 2106 and attach it to your Form 1040, U. Where can i file 2012 taxes S. Where can i file 2012 taxes Individual Income Tax Return. Where can i file 2012 taxes   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Where can i file 2012 taxes It is given as an equipment maintenance allowance (EMA) to employees of the U. Where can i file 2012 taxes S. Where can i file 2012 taxes Postal Service. Where can i file 2012 taxes It is at the rate contained in the 1991 collective bargaining agreement. Where can i file 2012 taxes Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Where can i file 2012 taxes See your employer for information on your reimbursement. Where can i file 2012 taxes    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Where can i file 2012 taxes Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Where can i file 2012 taxes For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Where can i file 2012 taxes If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Where can i file 2012 taxes You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Where can i file 2012 taxes See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Where can i file 2012 taxes You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Where can i file 2012 taxes See chapter 6 for more information on reimbursements . Where can i file 2012 taxes Choosing the standard mileage rate. Where can i file 2012 taxes   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Where can i file 2012 taxes Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Where can i file 2012 taxes   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Where can i file 2012 taxes For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Where can i file 2012 taxes   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Where can i file 2012 taxes You cannot revoke the choice. Where can i file 2012 taxes However, in later years, you can switch from the standard mileage rate to the actual expenses method. Where can i file 2012 taxes If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Where can i file 2012 taxes Example. Where can i file 2012 taxes Larry is an employee who occasionally uses his own car for business purposes. Where can i file 2012 taxes He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Where can i file 2012 taxes Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Where can i file 2012 taxes   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Where can i file 2012 taxes Standard mileage rate not allowed. Where can i file 2012 taxes   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Where can i file 2012 taxes (See Rural mail carriers , earlier. Where can i file 2012 taxes ) Note. Where can i file 2012 taxes You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Where can i file 2012 taxes Five or more cars. Where can i file 2012 taxes   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Where can i file 2012 taxes However, you may be able to deduct your actual expenses for operating each of the cars in your business. Where can i file 2012 taxes See Actual Car Expenses , later, for information on how to figure your deduction. Where can i file 2012 taxes   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Where can i file 2012 taxes   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Where can i file 2012 taxes Example 1. Where can i file 2012 taxes Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Where can i file 2012 taxes She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Where can i file 2012 taxes Example 2. Where can i file 2012 taxes Tony and his employees use his four pickup trucks in his landscaping business. Where can i file 2012 taxes During the year, he traded in two of his old trucks for two newer ones. Where can i file 2012 taxes Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Where can i file 2012 taxes Example 3. Where can i file 2012 taxes Chris owns a repair shop and an insurance business. Where can i file 2012 taxes He and his employees use his two pickup trucks and van for the repair shop. Where can i file 2012 taxes Chris alternates using his two cars for the insurance business. Where can i file 2012 taxes No one else uses the cars for business purposes. Where can i file 2012 taxes Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Where can i file 2012 taxes Example 4. Where can i file 2012 taxes Maureen owns a car and four vans that are used in her housecleaning business. Where can i file 2012 taxes Her employees use the vans, and she uses the car to travel to various customers. Where can i file 2012 taxes Maureen cannot use the standard mileage rate for the car or the vans. Where can i file 2012 taxes This is because all five vehicles are used in Maureen's business at the same time. Where can i file 2012 taxes She must use actual expenses for all vehicles. Where can i file 2012 taxes Interest. Where can i file 2012 taxes   If you are an employee, you cannot deduct any interest paid on a car loan. Where can i file 2012 taxes This applies even if you use the car 100% for business as an employee. Where can i file 2012 taxes   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Where can i file 2012 taxes For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Where can i file 2012 taxes You cannot deduct the part of the interest expense that represents your personal use of the car. Where can i file 2012 taxes    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Where can i file 2012 taxes See Publication 936, Home Mortgage Interest Deduction, for more information. Where can i file 2012 taxes Personal property taxes. Where can i file 2012 taxes   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Where can i file 2012 taxes You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Where can i file 2012 taxes   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Where can i file 2012 taxes If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Where can i file 2012 taxes Parking fees and tolls. Where can i file 2012 taxes   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Where can i file 2012 taxes (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Where can i file 2012 taxes ) Sale, trade-in, or other disposition. Where can i file 2012 taxes   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Where can i file 2012 taxes See Disposition of a Car , later. Where can i file 2012 taxes Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Where can i file 2012 taxes If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Where can i file 2012 taxes Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Where can i file 2012 taxes Continue to keep records, as explained later in chapter 5 . Where can i file 2012 taxes Business and personal use. Where can i file 2012 taxes   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Where can i file 2012 taxes You can divide your expense based on the miles driven for each purpose. Where can i file 2012 taxes Example. Where can i file 2012 taxes You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Where can i file 2012 taxes You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Where can i file 2012 taxes Employer-provided vehicle. Where can i file 2012 taxes   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Where can i file 2012 taxes You cannot use the standard mileage rate. Where can i file 2012 taxes See Vehicle Provided by Your Employer in chapter 6. Where can i file 2012 taxes Interest on car loans. Where can i file 2012 taxes   If you are an employee, you cannot deduct any interest paid on a car loan. Where can i file 2012 taxes This interest is treated as personal interest and is not deductible. Where can i file 2012 taxes If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Where can i file 2012 taxes Taxes paid on your car. Where can i file 2012 taxes   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Where can i file 2012 taxes Enter the amount paid on line 7 of Schedule A (Form 1040). Where can i file 2012 taxes Sales taxes. Where can i file 2012 taxes   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Where can i file 2012 taxes Fines and collateral. Where can i file 2012 taxes   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Where can i file 2012 taxes Casualty and theft losses. Where can i file 2012 taxes   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Where can i file 2012 taxes See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Where can i file 2012 taxes Depreciation and section 179 deductions. Where can i file 2012 taxes   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Where can i file 2012 taxes Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Where can i file 2012 taxes However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Where can i file 2012 taxes Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Where can i file 2012 taxes The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Where can i file 2012 taxes   Generally, there are limits on these deductions. Where can i file 2012 taxes Special rules apply if you use your car 50% or less in your work or business. Where can i file 2012 taxes   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Where can i file 2012 taxes   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Where can i file 2012 taxes Car defined. Where can i file 2012 taxes   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Where can i file 2012 taxes Its unloaded gross vehicle weight must not be more than 6,000 pounds. Where can i file 2012 taxes A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Where can i file 2012 taxes   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Where can i file 2012 taxes Qualified nonpersonal use vehicles. Where can i file 2012 taxes   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Where can i file 2012 taxes They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Where can i file 2012 taxes Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Where can i file 2012 taxes More information. Where can i file 2012 taxes   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Where can i file 2012 taxes Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Where can i file 2012 taxes If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Where can i file 2012 taxes There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Where can i file 2012 taxes See Depreciation Limits, later. Where can i file 2012 taxes You can claim the section 179 deduction only in the year you place the car in service. Where can i file 2012 taxes For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Where can i file 2012 taxes Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Where can i file 2012 taxes A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Where can i file 2012 taxes Example. Where can i file 2012 taxes In 2012, you bought a new car and used it for personal purposes. Where can i file 2012 taxes In 2013, you began to use it for business. Where can i file 2012 taxes Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Where can i file 2012 taxes However, you can claim a depreciation deduction for the business use of the car starting in 2013. Where can i file 2012 taxes See Depreciation Deduction , later. Where can i file 2012 taxes More than 50% business use requirement. Where can i file 2012 taxes   You must use the property more than 50% for business to claim any section 179 deduction. Where can i file 2012 taxes If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Where can i file 2012 taxes The result is the cost of the property that can qualify for the section 179 deduction. Where can i file 2012 taxes Example. Where can i file 2012 taxes Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Where can i file 2012 taxes Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Where can i file 2012 taxes But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Where can i file 2012 taxes Limits. Where can i file 2012 taxes   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Where can i file 2012 taxes Limit on the amount of the section 179 deduction. Where can i file 2012 taxes   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Where can i file 2012 taxes   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Where can i file 2012 taxes If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Where can i file 2012 taxes   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Where can i file 2012 taxes   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Where can i file 2012 taxes   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Where can i file 2012 taxes You must allocate the dollar limit (after any reduction) between you. Where can i file 2012 taxes   For more information on the above section 179 deduction limits, see Publication 946. Where can i file 2012 taxes Limit for sport utility and certain other vehicles. Where can i file 2012 taxes   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Where can i file 2012 taxes This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Where can i file 2012 taxes However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Where can i file 2012 taxes    Limit on total section 179, special depreciation allowance, and depreciation deduction. Where can i file 2012 taxes   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Where can i file 2012 taxes The limit is reduced if your business use of the car is less than 100%. Where can i file 2012 taxes See Depreciation Limits , later, for more information. Where can i file 2012 taxes Example. Where can i file 2012 taxes In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Where can i file 2012 taxes However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Where can i file 2012 taxes Cost of car. Where can i file 2012 taxes   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Where can i file 2012 taxes For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Where can i file 2012 taxes Your cost includes only the cash you paid. Where can i file 2012 taxes Basis of car for depreciation. Where can i file 2012 taxes   The amount of the section 179 deduction reduces your basis in your car. Where can i file 2012 taxes If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Where can i file 2012 taxes The resulting amount is the basis in your car you use to figure your depreciation deduction. Where can i file 2012 taxes When to choose. Where can i file 2012 taxes   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Where can i file 2012 taxes How to choose. Where can i file 2012 taxes    Employees use Form 2106 to make this choice and report the section 179 deduction. Where can i file 2012 taxes All others use Form 4562. Where can i file 2012 taxes   File the appropriate form with either of the following. Where can i file 2012 taxes Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Where can i file 2012 taxes An amended return filed within the time prescribed by law. Where can i file 2012 taxes An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Where can i file 2012 taxes The amended return must also include any resulting adjustments to taxable income. Where can i file 2012 taxes    You must keep records that show the specific identification of each piece of qualifying section 179 property. Where can i file 2012 taxes These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Where can i file 2012 taxes Revoking an election. Where can i file 2012 taxes   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Where can i file 2012 taxes Recapture of section 179 deduction. Where can i file 2012 taxes   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Where can i file 2012 taxes If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Where can i file 2012 taxes Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Where can i file 2012 taxes For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Where can i file 2012 taxes Dispositions. Where can i file 2012 taxes   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Where can i file 2012 taxes You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Where can i file 2012 taxes For information on the disposition of a car, see Disposition of a Car , later. Where can i file 2012 taxes Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Where can i file 2012 taxes The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Where can i file 2012 taxes The special depreciation allowance applies only for the first year the car is placed in service. Where can i file 2012 taxes To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Where can i file 2012 taxes Combined depreciation. Where can i file 2012 taxes   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Where can i file 2012 taxes For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Where can i file 2012 taxes See Depreciation Limits , later in this chapter. Where can i file 2012 taxes Qualified car. Where can i file 2012 taxes   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Where can i file 2012 taxes You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Where can i file 2012 taxes Election not to claim the special depreciation allowance. Where can i file 2012 taxes   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Where can i file 2012 taxes If you make this election, it applies to all 5-year property placed in service during the year. Where can i file 2012 taxes   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Where can i file 2012 taxes    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Where can i file 2012 taxes Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Where can i file 2012 taxes This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Where can i file 2012 taxes You generally need to know the following things about the car you intend to depreciate. Where can i file 2012 taxes Your basis in the car. Where can i file 2012 taxes The date you place the car in service. Where can i file 2012 taxes The method of depreciation and recovery period you will use. Where can i file 2012 taxes Basis. Where can i file 2012 taxes   Your basis in a car for figuring depreciation is generally its cost. Where can i file 2012 taxes This includes any amount you borrow or pay in cash, other property, or services. Where can i file 2012 taxes   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Where can i file 2012 taxes However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Where can i file 2012 taxes For one of these situations see Exception under Methods of depreciation, later. Where can i file 2012 taxes   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Where can i file 2012 taxes Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Where can i file 2012 taxes Placed in service. Where can i file 2012 taxes   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Where can i file 2012 taxes Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Where can i file 2012 taxes   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Where can i file 2012 taxes Car placed in service and disposed of in the same year. Where can i file 2012 taxes   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Where can i file 2012 taxes Methods of depreciation. Where can i file 2012 taxes   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Where can i file 2012 taxes MACRS is discussed later in this chapter. Where can i file 2012 taxes Exception. Where can i file 2012 taxes   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Where can i file 2012 taxes You must use straight line depreciation over the estimated remaining useful life of the car. Where can i file 2012 taxes   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Where can i file 2012 taxes The rate per mile varies depending on the year(s) you used the standard mileage rate. Where can i file 2012 taxes For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Where can i file 2012 taxes   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Where can i file 2012 taxes You must use your adjusted basis in your car to figure your depreciation deduction. Where can i file 2012 taxes For additional information on the straight line method of depreciation, see Publication 946. Where can i file 2012 taxes More-than-50%-use test. Where can i file 2012 taxes   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Where can i file 2012 taxes You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Where can i file 2012 taxes   If your business use is 50% or less, you must use the straight line method to depreciate your car. Where can i file 2012 taxes This is explained later under Car Used 50% or Less for Business . Where can i file 2012 taxes Qualified business use. Where can i file 2012 taxes   A qualified business use is any use in your trade or business. Where can i file 2012 taxes It does not include use for the production of income (investment use). Where can i file 2012 taxes However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Where can i file 2012 taxes Use of your car by another person. Where can i file 2012 taxes   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Where can i file 2012 taxes It is directly connected with your business. Where can i file 2012 taxes It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Where can i file 2012 taxes It results in a payment of fair market rent. Where can i file 2012 taxes This includes any payment to you for the use of your car. Where can i file 2012 taxes Business use changes. Where can i file 2012 taxes   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Where can i file 2012 taxes See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Where can i file 2012 taxes    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Where can i file 2012 taxes Use for more than one purpose. Where can i file 2012 taxes   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Where can i file 2012 taxes You do this on the basis of mileage. Where can i file 2012 taxes Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Where can i file 2012 taxes Change from personal to business use. Where can i file 2012 taxes   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Where can i file 2012 taxes In this case, you figure the percentage of business use for the year as follows. Where can i file 2012 taxes Determine the percentage of business use for the period following the change. Where can i file 2012 taxes Do this by dividing business miles by total miles driven during that period. Where can i file 2012 taxes Multiply the percentage in (1) by a fraction. Where can i file 2012 taxes The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Where can i file 2012 taxes Example. Where can i file 2012 taxes You use a car only for personal purposes during the first 6 months of the year. Where can i file 2012 taxes During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Where can i file 2012 taxes This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Where can i file 2012 taxes Your business use for the year is 40% (80% × 6/12). Where can i file 2012 taxes Limits. Where can i file 2012 taxes   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Where can i file 2012 taxes The maximum amount you can claim depends on the year in which you placed your car in service. Where can i file 2012 taxes You have to reduce the maximum amount if you did not use the car exclusively for business. Where can i file 2012 taxes See Depreciation Limits , later. Where can i file 2012 taxes Unadjusted basis. Where can i file 2012 taxes   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Where can i file 2012 taxes Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Where can i file 2012 taxes   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Where can i file 2012 taxes Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Where can i file 2012 taxes Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Where can i file 2012 taxes Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Where can i file 2012 taxes 1, 2006), and alternative motor vehicle credit. Where can i file 2012 taxes   See Form 8910 for information on the alternative motor vehicle credit. Where can i file 2012 taxes If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Where can i file 2012 taxes See Car Used 50% or Less for Business, later, for more information. Where can i file 2012 taxes If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Where can i file 2012 taxes Improvements. Where can i file 2012 taxes   A major improvement to a car is treated as a new item of 5-year recovery property. Where can i file 2012 taxes It is treated as placed in service in the year the improvement is made. Where can i file 2012 taxes It does not matter how old the car is when the improvement is added. Where can i file 2012 taxes Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Where can i file 2012 taxes However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Where can i file 2012 taxes Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Where can i file 2012 taxes See Depreciation Limits , later. Where can i file 2012 taxes Car trade-in. Where can i file 2012 taxes   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Where can i file 2012 taxes You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Where can i file 2012 taxes If you make this election, you treat the old car as disposed of at the time of the trade-in. Where can i file 2012 taxes The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Where can i file 2012 taxes You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Where can i file 2012 taxes You make this election by completing Form 2106, Part II, Section D. Where can i file 2012 taxes This method is explained later, beginning at Effect of trade-in on basis . Where can i file 2012 taxes If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Where can i file 2012 taxes You must apply two depreciation limits (see Depreciation Limits , later). Where can i file 2012 taxes The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Where can i file 2012 taxes The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Where can i file 2012 taxes You must use Form 4562 to compute your depreciation deduction. Where can i file 2012 taxes You cannot use Form 2106, Part II, Section D. Where can i file 2012 taxes This method is explained in Publication 946. Where can i file 2012 taxes   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Where can i file 2012 taxes Otherwise, you must use the method described in (2). Where can i file 2012 taxes Effect of trade-in on basis. Where can i file 2012 taxes   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Where can i file 2012 taxes For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Where can i file 2012 taxes 168(i)-6(d)(3). Where can i file 2012 taxes Traded car used only for business. Where can i file 2012 taxes   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Where can i file 2012 taxes Example. Where can i file 2012 taxes Paul trades in a car that has an adjusted basis of $5,000 for a new car. Where can i file 2012 taxes In addition, he pays cash of $20,000 for the new car. Where can i file 2012 taxes His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Where can i file 2012 taxes Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Where can i file 2012 taxes Traded car used partly in business. Where can i file 2012 taxes   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Where can i file 2012 taxes This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Where can i file 2012 taxes (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Where can i file 2012 taxes See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Where can i file 2012 taxes )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Where can i file 2012 taxes Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Where can i file 2012 taxes For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Where can i file 2012 taxes Modified Accelerated Cost Recovery System (MACRS). Where can i file 2012 taxes   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Where can i file 2012 taxes   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Where can i file 2012 taxes See Depreciation Limits , later. Where can i file 2012 taxes Recovery period. Where can i file 2012 taxes   Under MACRS, cars are classified as 5-year property. Where can i file 2012 taxes You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Where can i file 2012 taxes This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Where can i file 2012 taxes Depreciation deduction for certain Indian reservation property. Where can i file 2012 taxes   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Where can i file 2012 taxes The recovery that applies for a business-use car is 3 years instead of 5 years. Where can i file 2012 taxes However, the depreciation limits, discussed later, will still apply. Where can i file 2012 taxes   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Where can i file 2012 taxes Depreciation methods. Where can i file 2012 taxes   You can use one of the following methods to depreciate your car. Where can i file 2012 taxes The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Where can i file 2012 taxes The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Where can i file 2012 taxes The straight line method (SL) over a 5-year recovery period. Where can i file 2012 taxes    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Where can i file 2012 taxes This is because the chart has the switch to the straight line method built into its rates. Where can i file 2012 taxes   Before choosing a method, you may wish to consider the following facts. Where can i file 2012 taxes Using the straight line method provides equal yearly deductions throughout the recovery period. Where can i file 2012 taxes Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Where can i file 2012 taxes MACRS depreciation chart. Where can i file 2012 taxes   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Where can i file 2012 taxes Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Where can i file 2012 taxes A similar chart appears in the Instructions for Form 2106. Where can i file 2012 taxes    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Where can i file 2012 taxes   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Where can i file 2012 taxes You file your return on a fiscal year basis. Where can i file 2012 taxes You file your return for a short tax year (less than 12 months). Where can i file 2012 taxes During the year, all of the following conditions apply. Where can i file 2012 taxes You placed some property in service from January through September. Where can i file 2012 taxes You placed some property in service from October through December. Where can i file 2012 taxes Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Where can i file 2012 taxes   You placed qualified property in service on an Indian reservation. Where can i file 2012 taxes Depreciation in future years. Where can i file 2012 taxes   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Where can i file 2012 taxes However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Where can i file 2012 taxes In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Where can i file 2012 taxes See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Where can i file 2012 taxes    In future years, do not use the chart in this edition of the publication. Where can i file 2012 taxes Instead, use the chart in the publication or the form instructions for those future years. Where can i file 2012 taxes Disposition of car during recovery period. Where can i file 2012 taxes   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Where can i file 2012 taxes See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Where can i file 2012 taxes How to use the 2013 chart. Where can i file 2012 taxes   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Where can i file 2012 taxes Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Where can i file 2012 taxes If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Where can i file 2012 taxes    Your deduction cannot be more than the maximum depreciation limit for cars. Where can i file 2012 taxes See Depreciation Limits, later. Where can i file 2012 taxes Example. Where can i file 2012 taxes Phil bought a used truck in February 2012 to use exclusively in his landscape business. Where can i file 2012 taxes He paid $9,200 for the truck with no trade-in. Where can i file 2012 taxes Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Where can i file 2012 taxes Phil used the MACRS depreciation chart in 2012 to find his percentage. Where can i file 2012 taxes The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Where can i file 2012 taxes He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Where can i file 2012 taxes In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Where can i file 2012 taxes His records show that the business use of his truck was 90% in 2013. Where can i file 2012 taxes Phil used Table 4-1 to find his percentage. Where can i file 2012 taxes Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Where can i file 2012 taxes He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Where can i file 2012 taxes Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Where can i file 2012 taxes The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Where can i file 2012 taxes The maximum amount you can deduct each year depends on the year you place the car in service. Where can i file 2012 taxes These limits are shown in the following tables. Where can i file 2012 taxes   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Where can i file 2012 taxes 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Where can i file 2012 taxes 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Where can i file 2012 taxes 4$7,660 if you acquired the car before 5/6/2003. Where can i file 2012 taxes $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Where can i file 2012 taxes 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Where can i file 2012 taxes Trucks and vans. Where can i file 2012 taxes   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Where can i file 2012 taxes A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Where can i file 2012 taxes For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Where can i file 2012 taxes Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Where can i file 2012 taxes 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Where can i file 2012 taxes Car used less than full year. Where can i file 2012 taxes   The depreciation limits are not reduced if you use a car for less than a full year. Where can i file 2012 taxes This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Where can i file 2012 taxes However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Where can i file 2012 taxes See Reduction for personal use , next. Where can i file 2012 taxes Reduction for personal use. Where can i file 2012 taxes   The depreciation limits are reduced based on your percentage of personal use. Where can i file 2012 taxes If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Where can i file 2012 taxes Section 179 deduction. Where can i file 2012 taxes   The section 179 deduction is treated as a depreciation deduction. Where can i file 2012 taxes If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Where can i file 2012 taxes Example. Where can i file 2012 taxes On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Where can i file 2012 taxes He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Where can i file 2012 taxes The car is not qualified property for purposes of the special depreciation allowance. Where can i file 2012 taxes Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Where can i file 2012 taxes This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Where can i file 2012 taxes Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Where can i file 2012 taxes He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Where can i file 2012 taxes Jack has reached his maximum depreciation deduction for 2013. Where can i file 2012 taxes For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Where can i file 2012 taxes Deductions in years after the recovery period. Where can i file 2012 taxes   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Where can i file 2012 taxes If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Where can i file 2012 taxes Unrecovered basis. Where can i file 2012 taxes   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Where can i file 2012 taxes The recovery period. Where can i file 2012 taxes   For 5-year property, your recovery period is 6 calendar years. Where can i file 2012 taxes A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Where can i file 2012 taxes   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Where can i file 2012 taxes You determine your unrecovered basis in the 7th year after you placed the car in service. Where can i file 2012 taxes How to treat unrecovered basis. Where can i file 2012 taxes   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Where can i file 2012 taxes The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Where can i file 2012 taxes For example, no deduction is allowed for a year you use your car 100% for personal purposes. Where can i file 2012 taxes Example. Where can i file 2012 taxes In April 2007, Bob bought and placed in service a car he used exclusively in his business. Where can i file 2012 taxes The car cost $31,500. Where can i file 2012 taxes Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Where can i file 2012 taxes He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Where can i file 2012 taxes For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Where can i file 2012 taxes Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Where can i file 2012 taxes      MACRS     Deprec. Where can i file 2012 taxes Year % Amount Limit Allowed 2007 20. Where can i file 2012 taxes 00 $6,300 $3,060 $ 3,060 2008 32. Where can i file 2012 taxes 00 10,080 4,900 4,900 2009 19. Where can i file 2012 taxes 20 6,048 2,850 2,850 2010 11. Where can i file 2012 taxes 52 3,629 1,775 1,775 2011 11. Where can i file 2012 taxes 52 3,629 1,775 1,775 2012 5. Where can i file 2012 taxes 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Where can i file 2012 taxes   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Where can i file 2012 taxes If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Where can i file 2012 taxes   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Where can i file 2012 taxes However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Where can i file 2012 taxes For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Where can i file 2012 taxes Table 4-1. Where can i file 2012 taxes 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Where can i file 2012 taxes ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Where can i file 2012 taxes   First, using the left column, find the date you first placed the car in service in 2013. Where can i file 2012 taxes Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Where can i file 2012 taxes For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Where can i file 2012 taxes Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Where can i file 2012 taxes (See Car Used 50% or Less for Business . Where can i file 2012 taxes )  Multiply the unadjusted basis of your car by your business use percentage. Where can i file 2012 taxes Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Where can i file 2012 taxes (Also see Depreciation Limits . Where can i file 2012 taxes )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Where can i file 2012 taxes 1—Sept. Where can i file 2012 taxes 30 percentage instead of the Oct. Where can i file 2012 taxes 1—Dec. Where can i file 2012 taxes 31 percentage for your car. Where can i file 2012 taxes               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Where can i file 2012 taxes If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Where can i file 2012 taxes 1—Sept. Where can i file 2012 taxes 30 for figuring depreciation for your car. Where can i file 2012 taxes See Which Convention Applies? in chapter 4 of Publication 946 for more details. Where can i file 2012 taxes               Example. Where can i file 2012 taxes You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Where can i file 2012 taxes You