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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

1040 Nr Tax Form

Amend Taxes OnlineState Tax Online FilingTax Planning Us 1040ezFree 2012 Tax SoftwarePrint 1040ezH&r Block 2011 Tax Software DownloadTax Returns1040ez2012File Your Taxes Online For FreeFile For A Tax Extension FreeHow To Fill 1040nrFile Amended Tax ReturnFile 1040nr Ez Online FreeFree Ez Tax FormTax Form 1040 Year 2008Filing Tax Return Someone Love DiedHow To File State Taxes OnlineFree Taxes H&r BlockAmendment Tax Return 2012Do I File 2008 Tax ReturnFree Federal Tax Filing 2011Irs Forms 10401040ez Tax TablesHow To File An Amended Tax Return 2013Filing 2010 Tax ReturnTaxes For StudentsFree Prior Year Tax Filing FreeFile 2011 California State TaxesMyfreetaxes Com2009 Turbo Tax2012 Federal 1040ez FormLast Day To File Taxes 20132012 Tax Forms Online1040a 2012 Tax Form2011 Tax Return OnlineFree Tax Filing 2011Free 2011 Tax Return OnlineH & R Block Free Online TaxesFree File Gov1040ez Forms

1040 Nr Tax Form

1040 nr tax form Index A Absence, temporary, Temporary absences. 1040 nr tax form Address, change of, Reminders Aliens (see Nonresident aliens) Alimony, Alimony. 1040 nr tax form , Alimony, Instruments Executed Before 1985 Community income, Alimony (Community Income) Fees paid for getting, Fees for getting alimony. 1040 nr tax form No exemption for spouse, Alimony paid. 1040 nr tax form Annual exclusion, gift tax, Annual exclusion. 1040 nr tax form Annulment decrees Absolute decree, Ending the Marital Community Amended return required, Unmarried persons. 1040 nr tax form Considered unmarried, Unmarried persons. 1040 nr tax form Archer MSA, Archer medical savings account (MSA). 1040 nr tax form Assistance (see Tax help) B Basis Property received in settlement, Basis of property received. 1040 nr tax form Benefits paid under QDROs, Benefits paid to a child or other dependent. 1040 nr tax form , Benefits paid to a spouse or former spouse. 1040 nr tax form Birth of dependent, Death or birth. 1040 nr tax form C Change of address, Reminders Change of name, Reminders Change of withholding, Reminders Child custody, Custodial parent and noncustodial parent. 1040 nr tax form Child support Alimony, difference from, Child support. 1040 nr tax form Clearly associated with contingency, Clearly associated with a contingency. 1040 nr tax form Contingency relating to child, Contingency relating to your child. 1040 nr tax form Payment specifically designated as, Specifically designated as child support. 1040 nr tax form Child support under pre-1985 agreement, Child support under pre-1985 agreement. 1040 nr tax form Child tax credit, Exemptions for Dependents Children Birth of child Head of household, qualifying person to file as, Death or birth. 1040 nr tax form Claiming parent, when child is head of household, Special rule for parent. 1040 nr tax form Custody of, Custodial parent and noncustodial parent. 1040 nr tax form Death of child Head of household, qualifying person to file as, Death or birth. 1040 nr tax form Photographs of missing children, Reminders Community income, Community Income, Alimony (Community Income) Community property, Community Property, Alimony (Community Income) (see also Community income) Ending the marital community, Ending the Marital Community Laws disregarded, Certain community income not treated as community income by one spouse. 1040 nr tax form States, Community property states. 1040 nr tax form Costs of getting divorce, Costs of Getting a Divorce Fees for tax advice, Fees for tax advice. 1040 nr tax form Nondeductible expenses, Nondeductible expenses. 1040 nr tax form Custody of child, Custodial parent and noncustodial parent. 1040 nr tax form D Death of dependent, Death or birth. 1040 nr tax form Death of recipient spouse. 1040 nr tax form , Alimony Requirements Debts of spouse Refund applied to, Tax refund applied to spouse's debts. 1040 nr tax form Deductions Alimony paid, Deducting alimony paid. 1040 nr tax form Alimony recapture, Deducting the recapture. 1040 nr tax form Limits on IRAs, IRA contribution and deduction limits. 1040 nr tax form Marital, Marital deduction. 1040 nr tax form Dependents Exemption for, Exemptions for Dependents, Special Rule for Qualifying Child of More Than One Person Qualifying child, Exemptions for Dependents Qualifying child (Table 3), Table 3. 1040 nr tax form Overview of the Rules for Claiming an Exemption for a Dependent Qualifying relative, Exemptions for Dependents Qualifying relative (Table 3), Table 3. 1040 nr tax form Overview of the Rules for Claiming an Exemption for a Dependent Social security numbers, Reminders Divorce decrees Absolute decree, Ending the Marital Community Amended, Amended instrument. 1040 nr tax form Costs of getting, Costs of Getting a Divorce Defined for purposes of alimony, Divorce or separation instrument. 1040 nr tax form Invalid, Invalid decree. 1040 nr tax form Unmarried persons, Unmarried persons. 1040 nr tax form Divorced parents, Children of Divorced or Separated Parents (or Parents Who Live Apart) Child custody, Custodial parent and noncustodial parent. 1040 nr tax form Domestic relations orders (see Qualified domestic relations orders (QDROs)) Domicile, Community Income E Earned income, Earned income. 1040 nr tax form Equitable relief (see Relief from joint liability) Estimated tax, Tax Withholding and Estimated Tax Joint payments, Joint estimated tax payments. 1040 nr tax form Exemptions, Exemptions, Special Rule for Qualifying Child of More Than One Person Dependents, Exemptions for Dependents, Special Rule for Qualifying Child of More Than One Person Personal, Personal Exemptions Spouse, Exemption for Your Spouse F Fees for tax advice, Fees for tax advice. 1040 nr tax form Filing status, Filing Status, More information. 1040 nr tax form Head of household, Requirements. 1040 nr tax form Form 1040 Deducting alimony paid, Deducting alimony paid. 1040 nr tax form Reporting alimony received, Reporting alimony received. 1040 nr tax form Form 1040X Annulment, decree of, Unmarried persons. 1040 nr tax form Form 8332 Release of exemption to noncustodial parent, Written declaration. 1040 nr tax form Form 8379 Injured spouse, Injured spouse. 1040 nr tax form Form 8857 Innocent spouse relief, Relief from joint liability. 1040 nr tax form Form W-4 Withholding, Tax Withholding and Estimated Tax Form W-7 Individual taxpayer identification number (ITIN), Reminders Former spouse Defined for purposes of alimony, Spouse or former spouse. 1040 nr tax form Free tax services, How To Get Tax Help G Gift tax, Gift Tax on Property Settlements, Annual exclusion. 1040 nr tax form , Gift Tax Return H Head of household, Head of Household Health savings accounts (HSAs), Health savings account (HSA). 1040 nr tax form Help (see Tax help) Home owned jointly Alimony payments for, Payments for jointly-owned home. 1040 nr tax form Expenses for, as alimony (Table 4), Table 4. 1040 nr tax form Expenses for a Jointly-Owned Home Sale of, Sale of home. 1040 nr tax form HSAs (Health savings accounts), Health savings account (HSA). 1040 nr tax form I Identification number, Reminders Income, Community Income (see also Community income) Alimony received, Reporting alimony received. 1040 nr tax form Individual retirement arrangements (IRAs), Individual Retirement Arrangements, IRA contribution and deduction limits. 1040 nr tax form Individual taxpayer identification numbers (ITINs), Reminders Injured spouse, Injured spouse. 1040 nr tax form Innocent spouse relief, Relief from joint liability. 1040 nr tax form Insurance premiums, Life insurance premiums. 1040 nr tax form Invalid decree, Invalid decree. 1040 nr tax form IRAs (Individual retirement arrangements), Individual Retirement Arrangements, IRA contribution and deduction limits. 1040 nr tax form Itemized deductions on separate returns, Itemized deductions. 1040 nr tax form ITINs (Individual taxpayer identification numbers), Reminders J Joint liability Relief from, Reminders, Relief from joint liability. 1040 nr tax form Joint returns, Married Filing Jointly Change from separate return, Joint return after separate returns. 1040 nr tax form Change to separate return, Separate returns after joint return. 1040 nr tax form Divorced taxpayers, Divorced taxpayers. 1040 nr tax form Exemption for spouse, Joint return. 1040 nr tax form Joint and individual liability, Joint and individual liability. 1040 nr tax form Relief from joint liability, Relief from joint liability. 1040 nr tax form Signing, Signing a joint return. 1040 nr tax form Jointly-owned home Alimony payments for, Payments for jointly-owned home. 1040 nr tax form Expenses for, as alimony (Table 4), Table 4. 1040 nr tax form Expenses for a Jointly-Owned Home Sale of, Sale of Jointly-Owned Property, Sale of home. 1040 nr tax form K Kidnapped child Head of household status and, Kidnapped child. 1040 nr tax form L Liability for taxes (see Relief from joint liability) Life insurance premiums as alimony, Life insurance premiums. 1040 nr tax form M Marital community, ending, Ending the Marital Community Marital status, Marital status. 1040 nr tax form Married persons, Married persons. 1040 nr tax form Medical savings accounts (MSAs), Archer medical savings account (MSA). 1040 nr tax form Missing children, photographs of, Reminders More information (see Tax help) Mortgage payments as alimony, Payments for jointly-owned home. 1040 nr tax form MSAs (Medical savings accounts), Archer medical savings account (MSA). 1040 nr tax form N Name, change of, Reminders Nondeductible expenses, Nondeductible expenses. 1040 nr tax form Nonresident aliens Joint returns, Nonresident alien. 1040 nr tax form Withholding, Withholding on nonresident aliens. 1040 nr tax form P Parent Head of household, claim for, Special rule for parent. 1040 nr tax form Parents, divorced or separated, Children of Divorced or Separated Parents (or Parents Who Live Apart) Personal exemptions, Personal Exemptions Phaseout of Exemptions, Phaseout of Exemptions Property settlements, Property Settlements, Sale of home. 1040 nr tax form Publications (see Tax help) Q Qualified domestic relations orders (QDROs), Qualified Domestic Relations Order, Benefits paid to a child or other dependent. 1040 nr tax form , Benefits paid to a spouse or former spouse. 1040 nr tax form Qualifying child, exemption for, Exemptions for Dependents Qualifying child, exemption for (Table 3), Table 3. 1040 nr tax form Overview of the Rules for Claiming an Exemption for a Dependent Qualifying person, head of household, Qualifying person. 1040 nr tax form Table 2, Table 2. 1040 nr tax form Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Qualifying relative, exemption for, Exemptions for Dependents Qualifying relative, exemption for (Table 3), Table 3. 1040 nr tax form Overview of the Rules for Claiming an Exemption for a Dependent R Recapture of alimony, Recapture of Alimony Refunds Injured spouse, community property, Injured spouse. 1040 nr tax form Spouse's debts, applied to, Tax refund applied to spouse's debts. 1040 nr tax form Release of exemption to noncustodial parent, Written declaration. 1040 nr tax form Revocation, Revocation of release of claim to an exemption. 1040 nr tax form Relief from joint liability, Reminders, Relief from joint liability. 1040 nr tax form Relief from separate return liability Community income, Relief from liability arising from community property law. 1040 nr tax form Reporting requirements Alimony received, Reporting alimony received. 1040 nr tax form Returns Amended return required, Unmarried persons. 1040 nr tax form Joint (see Joint returns) Separate (see Separate returns) Rollovers, Rollovers. 1040 nr tax form S Sales of jointly-owned property, Sale of Jointly-Owned Property Section 1041 election, Basis of property received. 1040 nr tax form Separate maintenance decrees, Unmarried persons. 1040 nr tax form , Divorce or separation instrument. 1040 nr tax form , Ending the Marital Community Separate returns, Married Filing Separately Change to or from joint return, Joint return after separate returns. 1040 nr tax form Community or separate income, Community or separate income. 1040 nr tax form Exemption for spouse, Separate return. 1040 nr tax form Itemized deductions, Itemized deductions. 1040 nr tax form Relief from liability, Relief from liability arising from community property law. 1040 nr tax form Separate liability, Separate liability. 1040 nr tax form Tax consequences, Separate returns may give you a higher tax. 1040 nr tax form Separated parents, Children of Divorced or Separated Parents (or Parents Who Live Apart) Separation agreements, Ending the Marital Community Defined for purposes of alimony, Divorce or separation instrument. 1040 nr tax form Separation of liability (see Relief from joint liability) Settlement of property (see Property settlements) Social security benefits, Social security benefits. 1040 nr tax form Social security numbers (SSNs) Alimony recipient's number required, Alimony Dependents, Reminders Spousal IRA, Spousal IRA. 1040 nr tax form Spouse Defined for purposes of alimony, Spouse or former spouse. 1040 nr tax form Refund applied to debts, Tax refund applied to spouse's debts. 1040 nr tax form Statute of limitations Amended return, Unmarried persons. 1040 nr tax form Injured spouse allocation, Injured spouse. 1040 nr tax form T Tables and figures Exemption for dependents (Table 3), Table 3. 1040 nr tax form Overview of the Rules for Claiming an Exemption for a Dependent Itemized deductions on separate returns (Table 1), Table 1. 1040 nr tax form Itemized Deductions on Separate Returns Jointly-owned home, expenses for, as alimony (Table 4), Table 4. 1040 nr tax form Expenses for a Jointly-Owned Home Property transferred pursuant to divorce (Table 5), Table 5. 1040 nr tax form Property Transferred Pursuant to Divorce Qualifying person for head of household (Table 2), Table 2. 1040 nr tax form Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Tax advice fees, Fees for tax advice. 1040 nr tax form Tax help, How To Get Tax Help Tax withholding (see Withholding) Taxpayer Advocate, The Taxpayer Advocate Service is Here to Help You. 1040 nr tax form Taxpayer identification numbers, Reminders Third parties Alimony payments to, Payments to a third party. 1040 nr tax form , Payments to a third party. 1040 nr tax form Property settlements, transfers to, Transfers to third parties. 1040 nr tax form Tiebreaker rules, Tiebreaker rules. 1040 nr tax form TTY/TDD information, How To Get Tax Help U Underpayment of alimony, Underpayment. 1040 nr tax form Unmarried persons, Unmarried persons. 1040 nr tax form W Withholding Change of, Reminders, Tax Withholding and Estimated Tax Nonresident aliens, Withholding on nonresident aliens. 1040 nr tax form Worksheets Recapture of alimony (Worksheet 1), How to figure and report the recapture. 1040 nr tax form Prev  Up     Home   More Online Publications
Español

Forest Service

The Forest Service works to sustain the health, diversity, and productivity of the nation's forests and grasslands.

Contact the Agency or Department

Website: Forest Service

Contact In-Person: Contact Forest Service Regional Offices Locate a Forest or Grassland

E-mail:

Address: USDA Forest Service
1400 Independence Ave SW

Washington, DC 20250

Toll-free: (800) 832-1355

The 1040 Nr Tax Form

1040 nr tax form 9. 1040 nr tax form   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. 1040 nr tax form Depletion unit. 1040 nr tax form Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. 1040 nr tax form The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. 1040 nr tax form There are two ways of figuring depletion: cost depletion and percentage depletion. 1040 nr tax form For mineral property, you generally must use the method that gives you the larger deduction. 1040 nr tax form For standing timber, you must use cost depletion. 1040 nr tax form Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. 1040 nr tax form More than one person can have an economic interest in the same mineral deposit or timber. 1040 nr tax form In the case of leased property, the depletion deduction is divided between the lessor and the lessee. 1040 nr tax form You have an economic interest if both the following apply. 1040 nr tax form You have acquired by investment any interest in mineral deposits or standing timber. 1040 nr tax form You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. 1040 nr tax form A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. 1040 nr tax form A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. 1040 nr tax form Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. 1040 nr tax form Basis adjustment for depletion. 1040 nr tax form   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. 1040 nr tax form Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). 1040 nr tax form For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. 1040 nr tax form You can treat two or more separate interests as one property or as separate properties. 1040 nr tax form See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. 1040 nr tax form There are two ways of figuring depletion on mineral property. 1040 nr tax form Cost depletion. 1040 nr tax form Percentage depletion. 1040 nr tax form Generally, you must use the method that gives you the larger deduction. 1040 nr tax form However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. 1040 nr tax form See Oil and Gas Wells , later. 1040 nr tax form Cost Depletion To figure cost depletion you must first determine the following. 1040 nr tax form The property's basis for depletion. 1040 nr tax form The total recoverable units of mineral in the property's natural deposit. 1040 nr tax form The number of units of mineral sold during the tax year. 1040 nr tax form Basis for depletion. 1040 nr tax form   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. 1040 nr tax form Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. 1040 nr tax form The residual value of land and improvements at the end of operations. 1040 nr tax form The cost or value of land acquired for purposes other than mineral production. 1040 nr tax form Adjusted basis. 1040 nr tax form   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. 1040 nr tax form Your adjusted basis can never be less than zero. 1040 nr tax form See Publication 551, Basis of Assets, for more information on adjusted basis. 1040 nr tax form Total recoverable units. 1040 nr tax form   The total recoverable units is the sum of the following. 1040 nr tax form The number of units of mineral remaining at the end of the year (including units recovered but not sold). 1040 nr tax form The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). 1040 nr tax form   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. 1040 nr tax form You must include ores and minerals that are developed, in sight, blocked out, or assured. 1040 nr tax form You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. 1040 nr tax form But see Elective safe harbor for owners of oil and gas property , later. 1040 nr tax form Number of units sold. 1040 nr tax form   You determine the number of units sold during the tax year based on your method of accounting. 1040 nr tax form Use the following table to make this determination. 1040 nr tax form    IF you  use . 1040 nr tax form . 1040 nr tax form . 1040 nr tax form THEN the units sold during the year are . 1040 nr tax form . 1040 nr tax form . 1040 nr tax form The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). 1040 nr tax form An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. 1040 nr tax form   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. 1040 nr tax form Figuring the cost depletion deduction. 1040 nr tax form   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. 1040 nr tax form Step Action Result 1 Divide your property's basis for depletion by total recoverable units. 1040 nr tax form Rate per unit. 1040 nr tax form 2 Multiply the rate per unit by units sold during the tax year. 1040 nr tax form Cost depletion deduction. 1040 nr tax form You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. 1040 nr tax form Elective safe harbor for owners of oil and gas property. 1040 nr tax form   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. 1040 nr tax form If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). 1040 nr tax form For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. 1040 nr tax form irs. 1040 nr tax form gov/pub/irs-irbs/irb04-10. 1040 nr tax form pdf. 1040 nr tax form   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. 1040 nr tax form The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. 1040 nr tax form The election, if made, is effective for the tax year in which it is made and all later years. 1040 nr tax form It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. 1040 nr tax form Once revoked, it cannot be re-elected for the next 5 years. 1040 nr tax form Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. 1040 nr tax form The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . 1040 nr tax form Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . 1040 nr tax form Gross income. 1040 nr tax form   When figuring percentage depletion, subtract from your gross income from the property the following amounts. 1040 nr tax form Any rents or royalties you paid or incurred for the property. 1040 nr tax form The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. 1040 nr tax form A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. 1040 nr tax form   Use the following fraction to figure the part of the bonus you must subtract. 1040 nr tax form No. 1040 nr tax form of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. 1040 nr tax form For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. 1040 nr tax form Taxable income limit. 1040 nr tax form   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. 1040 nr tax form   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. 1040 nr tax form These deductible items include, but are not limited to, the following. 1040 nr tax form Operating expenses. 1040 nr tax form Certain selling expenses. 1040 nr tax form Administrative and financial overhead. 1040 nr tax form Depreciation. 1040 nr tax form Intangible drilling and development costs. 1040 nr tax form Exploration and development expenditures. 1040 nr tax form Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. 1040 nr tax form Losses sustained. 1040 nr tax form   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. 1040 nr tax form Do not deduct any net operating loss deduction from the gross income from the property. 1040 nr tax form Corporations do not deduct charitable contributions from the gross income from the property. 1040 nr tax form If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. 1040 nr tax form See section 1. 1040 nr tax form 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. 1040 nr tax form Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. 1040 nr tax form You are either an independent producer or a royalty owner. 1040 nr tax form The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. 1040 nr tax form If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. 1040 nr tax form For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. 1040 nr tax form Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. 1040 nr tax form However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. 1040 nr tax form For information on figuring the deduction, see Figuring percentage depletion , later. 1040 nr tax form Refiners who cannot claim percentage depletion. 1040 nr tax form   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. 1040 nr tax form The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. 1040 nr tax form Related person. 1040 nr tax form   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. 1040 nr tax form For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. 1040 nr tax form A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. 1040 nr tax form For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. 1040 nr tax form The value of the outstanding stock of a corporation. 1040 nr tax form The interest in the profits or capital of a partnership. 1040 nr tax form The beneficial interests in an estate or trust. 1040 nr tax form Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. 1040 nr tax form Retailers who cannot claim percentage depletion. 1040 nr tax form   You cannot claim percentage depletion if both the following apply. 1040 nr tax form You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. 1040 nr tax form Through a retail outlet operated by you or a related person. 1040 nr tax form To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. 1040 nr tax form To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. 1040 nr tax form The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. 1040 nr tax form   For the purpose of determining if this rule applies, do not count the following. 1040 nr tax form Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. 1040 nr tax form Bulk sales of aviation fuels to the Department of Defense. 1040 nr tax form Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. 1040 nr tax form Related person. 1040 nr tax form   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. 1040 nr tax form Sales through a related person. 1040 nr tax form   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. 1040 nr tax form   You are not considered to be selling through a related person who is a retailer if all the following apply. 1040 nr tax form You do not have a significant ownership interest in the retailer. 1040 nr tax form You sell your production to persons who are not related to either you or the retailer. 1040 nr tax form The retailer does not buy oil or natural gas from your customers or persons related to your customers. 1040 nr tax form There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. 1040 nr tax form Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. 1040 nr tax form Transferees who cannot claim percentage depletion. 1040 nr tax form   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. 1040 nr tax form For a definition of the term “transfer,” see section 1. 1040 nr tax form 613A-7(n) of the regulations. 1040 nr tax form For a definition of the term “interest in proven oil or gas property,” see section 1. 1040 nr tax form 613A-7(p) of the regulations. 1040 nr tax form Figuring percentage depletion. 1040 nr tax form   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. 1040 nr tax form If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. 1040 nr tax form If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. 1040 nr tax form   In addition, there is a limit on the percentage depletion deduction. 1040 nr tax form See Taxable income limit , later. 1040 nr tax form Average daily production. 1040 nr tax form   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. 1040 nr tax form Partial interest. 1040 nr tax form   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. 1040 nr tax form   You have a partial interest in the production from a property if you have a net profits interest in the property. 1040 nr tax form To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. 1040 nr tax form To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. 1040 nr tax form Then multiply the total production from the property by your percentage participation to figure your share of the production. 1040 nr tax form Example. 1040 nr tax form Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. 1040 nr tax form During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. 1040 nr tax form Javier had expenses of $90,000 attributable to the property. 1040 nr tax form The property generated a net profit of $110,000 ($200,000 − $90,000). 1040 nr tax form Pablo received income of $22,000 ($110,000 × . 1040 nr tax form 20) for his net profits interest. 1040 nr tax form Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). 1040 nr tax form Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). 1040 nr tax form Depletable oil or natural gas quantity. 1040 nr tax form   Generally, your depletable oil quantity is 1,000 barrels. 1040 nr tax form Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. 1040 nr tax form If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. 1040 nr tax form Example. 1040 nr tax form You have both oil and natural gas production. 1040 nr tax form To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. 1040 nr tax form Your depletable natural gas quantity is 2. 1040 nr tax form 16 million cubic feet of gas (360 × 6000). 1040 nr tax form You must reduce your depletable oil quantity to 640 barrels (1000 − 360). 1040 nr tax form If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. 1040 nr tax form Also, see Notice 2012-50, available at www. 1040 nr tax form irs. 1040 nr tax form gov/irb/2012–31_IRB/index. 1040 nr tax form html. 1040 nr tax form Business entities and family members. 1040 nr tax form   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. 1040 nr tax form Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). 1040 nr tax form You and your spouse and minor children. 1040 nr tax form A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. 1040 nr tax form Controlled group of corporations. 1040 nr tax form   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. 1040 nr tax form They share the depletable quantity. 1040 nr tax form A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. 1040 nr tax form ” Gross income from the property. 1040 nr tax form   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. 1040 nr tax form If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. 1040 nr tax form   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. 1040 nr tax form   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. 1040 nr tax form Average daily production exceeds depletable quantities. 1040 nr tax form   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. 1040 nr tax form Figure your average daily production of oil or natural gas for the year. 1040 nr tax form Figure your depletable oil or natural gas quantity for the year. 1040 nr tax form Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. 1040 nr tax form Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). 1040 nr tax form This is your depletion allowance for that property for the year. 1040 nr tax form Taxable income limit. 1040 nr tax form   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. 1040 nr tax form 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. 1040 nr tax form For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. 1040 nr tax form 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. 1040 nr tax form You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. 1040 nr tax form Add it to your depletion allowance (before applying any limits) for the following year. 1040 nr tax form Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. 1040 nr tax form (However, see Electing large partnerships must figure depletion allowance , later. 1040 nr tax form ) Each partner or shareholder must decide whether to use cost or percentage depletion. 1040 nr tax form If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. 1040 nr tax form Partner's or shareholder's adjusted basis. 1040 nr tax form   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. 1040 nr tax form The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. 1040 nr tax form   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. 1040 nr tax form However, in some cases, it is figured according to the partner's interest in partnership income. 1040 nr tax form   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. 1040 nr tax form Recordkeeping. 1040 nr tax form Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. 1040 nr tax form The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. 1040 nr tax form The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. 1040 nr tax form Reporting the deduction. 1040 nr tax form   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). 1040 nr tax form Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). 1040 nr tax form The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. 1040 nr tax form The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. 1040 nr tax form Form 6198, At-Risk Limitations. 1040 nr tax form Form 8582, Passive Activity Loss Limitations. 1040 nr tax form Electing large partnerships must figure depletion allowance. 1040 nr tax form   An electing large partnership, rather than each partner, generally must figure the depletion allowance. 1040 nr tax form The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. 1040 nr tax form Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. 1040 nr tax form   An electing large partnership is one that meets both the following requirements. 1040 nr tax form The partnership had 100 or more partners in the preceding year. 1040 nr tax form The partnership chooses to be an electing large partnership. 1040 nr tax form Disqualified persons. 1040 nr tax form   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. 1040 nr tax form Disqualified persons must figure it themselves, as explained earlier. 1040 nr tax form   All the following are disqualified persons. 1040 nr tax form Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). 1040 nr tax form Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). 1040 nr tax form Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. 1040 nr tax form Average daily production is discussed earlier. 1040 nr tax form Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. 1040 nr tax form Natural gas sold under a fixed contract. 1040 nr tax form   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. 1040 nr tax form This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. 1040 nr tax form The contract must have been in effect from February 1, 1975, until the date of sale of the gas. 1040 nr tax form Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. 1040 nr tax form Natural gas from geopressured brine. 1040 nr tax form   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. 1040 nr tax form This is natural gas that is both the following. 1040 nr tax form Produced from a well you began to drill after September 1978 and before 1984. 1040 nr tax form Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. 1040 nr tax form Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. 1040 nr tax form Mines and other natural deposits. 1040 nr tax form   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. 1040 nr tax form   The following is a list of the percentage depletion rates for the more common minerals. 1040 nr tax form DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. 1040 nr tax form Corporate deduction for iron ore and coal. 1040 nr tax form   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). 1040 nr tax form Gross income from the property. 1040 nr tax form   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. 1040 nr tax form Mining includes all the following. 1040 nr tax form Extracting ores or minerals from the ground. 1040 nr tax form Applying certain treatment processes described later. 1040 nr tax form Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. 1040 nr tax form Excise tax. 1040 nr tax form   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. 1040 nr tax form Extraction. 1040 nr tax form   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. 1040 nr tax form This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. 1040 nr tax form Treatment processes. 1040 nr tax form   The processes included as mining depend on the ore or mineral mined. 1040 nr tax form To qualify as mining, the treatment processes must be applied by the mine owner or operator. 1040 nr tax form For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. 1040 nr tax form Transportation of more than 50 miles. 1040 nr tax form   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. 1040 nr tax form    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. 1040 nr tax form Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. 1040 nr tax form For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. 1040 nr tax form irs. 1040 nr tax form gov/irb/2013-01_IRB/ar11. 1040 nr tax form html. 1040 nr tax form Disposal of coal or iron ore. 1040 nr tax form   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. 1040 nr tax form You disposed of it after holding it for more than 1 year. 1040 nr tax form You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. 1040 nr tax form Treat any gain on the disposition as a capital gain. 1040 nr tax form Disposal to related person. 1040 nr tax form   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. 1040 nr tax form A related person (as listed in chapter 2 of Publication 544). 1040 nr tax form A person owned or controlled by the same interests that own or control you. 1040 nr tax form Geothermal deposits. 1040 nr tax form   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. 1040 nr tax form A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. 1040 nr tax form For percentage depletion purposes, a geothermal deposit is not considered a gas well. 1040 nr tax form   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. 1040 nr tax form See Gross income from the property , earlier, under Oil and Gas Wells. 1040 nr tax form Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. 1040 nr tax form Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. 1040 nr tax form A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. 1040 nr tax form Bonuses and advanced royalties. 1040 nr tax form   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. 1040 nr tax form If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. 1040 nr tax form Figuring cost depletion. 1040 nr tax form   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. 1040 nr tax form To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. 1040 nr tax form Figuring percentage depletion. 1040 nr tax form   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . 1040 nr tax form Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. 1040 nr tax form However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. 1040 nr tax form Ending the lease. 1040 nr tax form   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. 1040 nr tax form Do this for the year the lease ends or is abandoned. 1040 nr tax form Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. 1040 nr tax form   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. 1040 nr tax form Include this amount in income for the year the lease ends. 1040 nr tax form Increase your adjusted basis in the property by the amount you include in income. 1040 nr tax form Delay rentals. 1040 nr tax form   These are payments for deferring development of the property. 1040 nr tax form Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. 1040 nr tax form These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. 1040 nr tax form Timber You can figure timber depletion only by the cost method. 1040 nr tax form Percentage depletion does not apply to timber. 1040 nr tax form Base your depletion on your cost or other basis in the timber. 1040 nr tax form Your cost does not include the cost of land or any amounts recoverable through depreciation. 1040 nr tax form Depletion takes place when you cut standing timber. 1040 nr tax form You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. 1040 nr tax form Figuring cost depletion. 1040 nr tax form   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. 1040 nr tax form Timber units. 1040 nr tax form   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. 1040 nr tax form You measure the timber using board feet, log scale, cords, or other units. 1040 nr tax form If you later determine that you have more or less units of timber, you must adjust the original estimate. 1040 nr tax form   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. 1040 nr tax form Depletion unit. 1040 nr tax form   You figure your depletion unit each year by taking the following steps. 1040 nr tax form Determine your cost or adjusted basis of the timber on hand at the beginning of the year. 1040 nr tax form Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. 1040 nr tax form Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. 1040 nr tax form Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. 1040 nr tax form Divide the result of (2) by the result of (3). 1040 nr tax form This is your depletion unit. 1040 nr tax form Example. 1040 nr tax form You bought a timber tract for $160,000 and the land was worth as much as the timber. 1040 nr tax form Your basis for the timber is $80,000. 1040 nr tax form Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). 1040 nr tax form If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). 1040 nr tax form When to claim depletion. 1040 nr tax form   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). 1040 nr tax form Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. 1040 nr tax form The inventory is your basis for determining gain or loss in the tax year you sell the timber products. 1040 nr tax form Example. 1040 nr tax form The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. 1040 nr tax form You would deduct $20,000 of the $40,000 depletion that year. 1040 nr tax form You would add the remaining $20,000 depletion to your closing inventory of timber products. 1040 nr tax form Electing to treat the cutting of timber as a sale or exchange. 1040 nr tax form   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. 1040 nr tax form You must make the election on your income tax return for the tax year to which it applies. 1040 nr tax form If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. 1040 nr tax form You generally report the gain as long-term capital gain. 1040 nr tax form The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. 1040 nr tax form For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. 1040 nr tax form   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. 1040 nr tax form The prior election (and revocation) is disregarded for purposes of making a subsequent election. 1040 nr tax form See Form T (Timber), Forest Activities Schedule, for more information. 1040 nr tax form Form T. 1040 nr tax form   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. 1040 nr tax form Prev  Up  Next   Home   More Online Publications