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1040ez Filing Online

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1040ez Filing Online

1040ez filing online 1. 1040ez filing online   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. 1040ez filing online Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. 1040ez filing online Reseller statement. 1040ez filing online Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. 1040ez filing online Deep-draft ocean-going vessels. 1040ez filing online Passenger vessels. 1040ez filing online Ocean-going barges. 1040ez filing online State or local governments. 1040ez filing online Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. 1040ez filing online Gasoline, including aviation gasoline and gasoline blendstocks. 1040ez filing online Diesel fuel, including dyed diesel fuel. 1040ez filing online Diesel-water fuel emulsion. 1040ez filing online Kerosene, including dyed kerosene and kerosene used in aviation. 1040ez filing online Other Fuels (including alternative fuels). 1040ez filing online Compressed natural gas (CNG). 1040ez filing online Fuels used in commercial transportation on inland waterways. 1040ez filing online Any liquid used in a fractional ownership program aircraft as fuel. 1040ez filing online The following terms are used throughout the discussion of fuel taxes. 1040ez filing online Other terms are defined in the discussion of the specific fuels to which they pertain. 1040ez filing online Agri-biodiesel. 1040ez filing online   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. 1040ez filing online Approved terminal or refinery. 1040ez filing online   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. 1040ez filing online Biodiesel. 1040ez filing online   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. 1040ez filing online Blended taxable fuel. 1040ez filing online   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. 1040ez filing online This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. 1040ez filing online Blender. 1040ez filing online   This is the person that produces blended taxable fuel. 1040ez filing online Bulk transfer. 1040ez filing online   This is the transfer of taxable fuel by pipeline or vessel. 1040ez filing online Bulk transfer/terminal system. 1040ez filing online   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. 1040ez filing online Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. 1040ez filing online Cellulosic biofuel. 1040ez filing online   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. 1040ez filing online Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). 1040ez filing online For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. 1040ez filing online Also see Second generation biofuel below. 1040ez filing online Diesel-water fuel emulsion. 1040ez filing online   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. 1040ez filing online The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 1040ez filing online Dry lease aircraft exchange. 1040ez filing online   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 1040ez filing online Enterer. 1040ez filing online   This is the importer of record (under customs law) for the taxable fuel. 1040ez filing online However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. 1040ez filing online If there is no importer of record, the owner at the time of entry into the United States is the enterer. 1040ez filing online Entry. 1040ez filing online   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. 1040ez filing online This does not apply to fuel brought into Puerto Rico (which is part of the U. 1040ez filing online S. 1040ez filing online customs territory), but does apply to fuel brought into the United States from Puerto Rico. 1040ez filing online Fractional ownership aircraft program and fractional program aircraft. 1040ez filing online   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 1040ez filing online Measurement of taxable fuel. 1040ez filing online   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. 1040ez filing online Other fuels. 1040ez filing online   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. 1040ez filing online Pipeline operator. 1040ez filing online   This is the person that operates a pipeline within the bulk transfer/terminal system. 1040ez filing online Position holder. 1040ez filing online   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. 1040ez filing online You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. 1040ez filing online A terminal operator that owns taxable fuel in its terminal is a position holder. 1040ez filing online Rack. 1040ez filing online   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. 1040ez filing online Refiner. 1040ez filing online   This is any person that owns, operates, or otherwise controls a refinery. 1040ez filing online Refinery. 1040ez filing online   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. 1040ez filing online However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. 1040ez filing online For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. 1040ez filing online Registrant. 1040ez filing online   This is a taxable fuel registrant (see Registration Requirements, later). 1040ez filing online Removal. 1040ez filing online   This is any physical transfer of taxable fuel. 1040ez filing online It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. 1040ez filing online However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. 1040ez filing online Renewable diesel. 1040ez filing online   See Renewable Diesel Credits in chapter 2. 1040ez filing online Sale. 1040ez filing online   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. 1040ez filing online For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. 1040ez filing online Second generation biofuel. 1040ez filing online   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. 1040ez filing online S. 1040ez filing online C. 1040ez filing online 7545). 1040ez filing online It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. 1040ez filing online It is not alcohol of less than 150 proof (disregard any added denaturants). 1040ez filing online See Form 6478 for more information. 1040ez filing online State. 1040ez filing online   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. 1040ez filing online An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. 1040ez filing online Taxable fuel. 1040ez filing online   This means gasoline, diesel fuel, and kerosene. 1040ez filing online Terminal. 1040ez filing online   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. 1040ez filing online It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. 1040ez filing online A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. 1040ez filing online Terminal operator. 1040ez filing online   This is any person that owns, operates, or otherwise controls a terminal. 1040ez filing online Throughputter. 1040ez filing online   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). 1040ez filing online Vessel operator. 1040ez filing online   This is the person that operates a vessel within the bulk transfer/terminal system. 1040ez filing online However, vessel does not include a deep draft ocean-going vessel. 1040ez filing online Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. 1040ez filing online A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. 1040ez filing online For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. 1040ez filing online The returns are due the last day of the month following the month in which the transaction occurs. 1040ez filing online Generally, these returns can be filed on paper or electronically. 1040ez filing online For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. 1040ez filing online Publication 3536 is only available on the IRS website. 1040ez filing online Form 720-TO. 1040ez filing online   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. 1040ez filing online Each terminal operator must file a separate form for each approved terminal. 1040ez filing online Form 720-CS. 1040ez filing online   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. 1040ez filing online Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. 1040ez filing online See Form 637 for other persons who must register and for more information about registration. 1040ez filing online Persons that are required to be registered. 1040ez filing online   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. 1040ez filing online Persons that may register. 1040ez filing online   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. 1040ez filing online Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. 1040ez filing online However, they must be registered to file claims for certain sales and uses of fuel. 1040ez filing online See Form 637 for more information. 1040ez filing online Taxable fuel registrant. 1040ez filing online   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. 1040ez filing online The term registrant as used in the discussions of these fuels means a taxable fuel registrant. 1040ez filing online Additional information. 1040ez filing online   See the Form 637 instructions for the information you must submit when you apply for registration. 1040ez filing online Failure to register. 1040ez filing online   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. 1040ez filing online Gasoline and Aviation Gasoline Gasoline. 1040ez filing online   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. 1040ez filing online Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. 1040ez filing online Gasoline also includes gasoline blendstocks, discussed later. 1040ez filing online Aviation gasoline. 1040ez filing online   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. 1040ez filing online Taxable Events The tax on gasoline is $. 1040ez filing online 184 per gallon. 1040ez filing online The tax on aviation gasoline is $. 1040ez filing online 194 per gallon. 1040ez filing online When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. 1040ez filing online 141 per gallon. 1040ez filing online See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. 1040ez filing online Tax is imposed on the removal, entry, or sale of gasoline. 1040ez filing online Each of these events is discussed later. 1040ez filing online Also, see the special rules that apply to gasoline blendstocks, later. 1040ez filing online If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. 1040ez filing online See Refunds of Second Tax in chapter 2. 1040ez filing online Removal from terminal. 1040ez filing online   All removals of gasoline at a terminal rack are taxable. 1040ez filing online The position holder for that gasoline is liable for the tax. 1040ez filing online Two-party exchanges. 1040ez filing online   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 1040ez filing online A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 1040ez filing online The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 1040ez filing online The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. 1040ez filing online The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 1040ez filing online The transaction is subject to a written contract. 1040ez filing online Terminal operator's liability. 1040ez filing online   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. 1040ez filing online   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. 1040ez filing online The terminal operator is a registrant. 1040ez filing online The terminal operator has an unexpired notification certificate (discussed later) from the position holder. 1040ez filing online The terminal operator has no reason to believe any information on the certificate is false. 1040ez filing online Removal from refinery. 1040ez filing online   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. 1040ez filing online It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 1040ez filing online It is made at the refinery rack. 1040ez filing online The refiner is liable for the tax. 1040ez filing online Exception. 1040ez filing online   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. 1040ez filing online The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 1040ez filing online The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 1040ez filing online The removal from the refinery is by railcar. 1040ez filing online The same person operates the refinery and the facility at which the gasoline is received. 1040ez filing online Entry into the United States. 1040ez filing online   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. 1040ez filing online It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 1040ez filing online It is not made by bulk transfer. 1040ez filing online The enterer is liable for the tax. 1040ez filing online Importer of record's liability. 1040ez filing online   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 1040ez filing online   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 1040ez filing online The importer of record has an unexpired notification certificate (discussed later) from the enterer. 1040ez filing online The importer of record has no reason to believe any information in the certificate is false. 1040ez filing online Customs bond. 1040ez filing online   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 1040ez filing online Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 1040ez filing online   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. 1040ez filing online The position holder is liable for the tax. 1040ez filing online The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 1040ez filing online However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 1040ez filing online Bulk transfers not received at approved terminal or refinery. 1040ez filing online   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. 1040ez filing online No tax was previously imposed (as discussed earlier) on any of the following events. 1040ez filing online The removal from the refinery. 1040ez filing online The entry into the United States. 1040ez filing online The removal from a terminal by an unregistered position holder. 1040ez filing online Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). 1040ez filing online   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. 1040ez filing online However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 1040ez filing online The owner is a registrant. 1040ez filing online The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. 1040ez filing online The owner has no reason to believe any information on the certificate is false. 1040ez filing online The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. 1040ez filing online The operator is jointly and severally liable if the owner does not meet these conditions. 1040ez filing online Sales to unregistered person. 1040ez filing online   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. 1040ez filing online   The seller is liable for the tax. 1040ez filing online However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 1040ez filing online   The seller is a registrant. 1040ez filing online The seller has an unexpired notification certificate (discussed later) from the buyer. 1040ez filing online The seller has no reason to believe any information on the certificate is false. 1040ez filing online The buyer of the gasoline is liable for the tax if the seller meets these conditions. 1040ez filing online The buyer is jointly and severally liable if the seller does not meet these conditions. 1040ez filing online Exception. 1040ez filing online   The tax does not apply to a sale if all of the following apply. 1040ez filing online The buyer's principal place of business is not in the United States. 1040ez filing online The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 1040ez filing online The seller is a registrant and the exporter of record. 1040ez filing online The fuel was exported. 1040ez filing online Removal or sale of blended gasoline. 1040ez filing online   The removal or sale of blended gasoline by the blender is taxable. 1040ez filing online See Blended taxable fuel under Definitions, earlier. 1040ez filing online   The blender is liable for the tax. 1040ez filing online The tax is figured on the number of gallons not previously subject to the tax on gasoline. 1040ez filing online   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. 1040ez filing online See Form 720 to report this tax. 1040ez filing online You also must be registered with the IRS as a blender. 1040ez filing online See Form 637. 1040ez filing online   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 1040ez filing online Notification certificate. 1040ez filing online   The notification certificate is used to notify a person of the registration status of the registrant. 1040ez filing online A copy of the registrant's letter of registration cannot be used as a notification certificate. 1040ez filing online A model notification certificate is shown in the Appendix as Model Certificate C. 1040ez filing online A notification certificate must contain all information necessary to complete the model. 1040ez filing online   The certificate may be included as part of any business records normally used for a sale. 1040ez filing online A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. 1040ez filing online The registrant must provide a new certificate if any information on a certificate has changed. 1040ez filing online Additional persons liable. 1040ez filing online   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. 1040ez filing online Gasoline Blendstocks Gasoline blendstocks may be subject to $. 1040ez filing online 001 per gallon LUST tax as discussed below. 1040ez filing online Gasoline includes gasoline blendstocks. 1040ez filing online The previous discussions apply to these blendstocks. 1040ez filing online However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. 1040ez filing online 001 per gallon or are not subject to the excise tax. 1040ez filing online Blendstocks. 1040ez filing online   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. 1040ez filing online   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. 1040ez filing online Not used to produce finished gasoline. 1040ez filing online   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. 1040ez filing online Removals and entries not connected to sale. 1040ez filing online   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. 1040ez filing online Removals and entries connected to sale. 1040ez filing online   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. 1040ez filing online The person has an unexpired certificate (discussed later) from the buyer. 1040ez filing online The person has no reason to believe any information in the certificate is false. 1040ez filing online Sales after removal or entry. 1040ez filing online   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. 1040ez filing online The seller is liable for the tax. 1040ez filing online However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. 1040ez filing online The seller has an unexpired certificate (discussed next) from the buyer. 1040ez filing online The seller has no reason to believe any information in the certificate is false. 1040ez filing online Certificate of buyer. 1040ez filing online   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. 1040ez filing online The certificate may be included as part of any business records normally used for a sale. 1040ez filing online A model certificate is shown in the Appendix as Model Certificate D. 1040ez filing online The certificate must contain all information necessary to complete the model. 1040ez filing online   A certificate expires on the earliest of the following dates. 1040ez filing online The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040ez filing online The date a new certificate is provided to the seller. 1040ez filing online The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. 1040ez filing online The buyer must provide a new certificate if any information on a certificate has changed. 1040ez filing online   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. 1040ez filing online Received at approved terminal or refinery. 1040ez filing online   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. 1040ez filing online The person is a registrant. 1040ez filing online The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. 1040ez filing online The person has no reason to believe any information on the certificate is false. 1040ez filing online Bulk transfers to registered industrial user. 1040ez filing online   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. 1040ez filing online An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. 1040ez filing online Credits or Refunds. 1040ez filing online   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. 1040ez filing online For more information, see chapter 2. 1040ez filing online Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). 1040ez filing online However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. 1040ez filing online Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. 1040ez filing online A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. 1040ez filing online A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. 1040ez filing online However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. 1040ez filing online Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 1040ez filing online 5 and No. 1040ez filing online 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. 1040ez filing online An excluded liquid is either of the following. 1040ez filing online A liquid that contains less than 4% normal paraffins. 1040ez filing online A liquid with all the following properties. 1040ez filing online Distillation range of 125 degrees Fahrenheit or less. 1040ez filing online Sulfur content of 10 ppm or less. 1040ez filing online Minimum color of +27 Saybolt. 1040ez filing online Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. 1040ez filing online Kerosene. 1040ez filing online   This means any of the following liquids. 1040ez filing online One of the two grades of kerosene (No. 1040ez filing online 1-K and No. 1040ez filing online 2-K) covered by ASTM specification D3699. 1040ez filing online Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). 1040ez filing online See Kerosene for Use in Aviation, later. 1040ez filing online   However, kerosene does not include excluded liquid, discussed earlier. 1040ez filing online   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. 1040ez filing online Diesel-powered highway vehicle. 1040ez filing online   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. 1040ez filing online Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. 1040ez filing online For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. 1040ez filing online 2) in chapter 2. 1040ez filing online Diesel-powered train. 1040ez filing online   This is any diesel-powered equipment or machinery that rides on rails. 1040ez filing online The term includes a locomotive, work train, switching engine, and track maintenance machine. 1040ez filing online Taxable Events The tax on diesel fuel and kerosene is $. 1040ez filing online 244 per gallon. 1040ez filing online It is imposed on the removal, entry, or sale of diesel fuel and kerosene. 1040ez filing online Each of these events is discussed later. 1040ez filing online Only the $. 1040ez filing online 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. 1040ez filing online If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. 1040ez filing online See Refunds of Second Tax in chapter 2. 1040ez filing online Use in certain intercity and local buses. 1040ez filing online   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. 1040ez filing online A claim for $. 1040ez filing online 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. 1040ez filing online An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. 1040ez filing online The bus must be engaged in one of the following activities. 1040ez filing online Scheduled transportation along regular routes regardless of the size of the bus. 1040ez filing online Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). 1040ez filing online A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. 1040ez filing online Removal from terminal. 1040ez filing online   All removals of diesel fuel and kerosene at a terminal rack are taxable. 1040ez filing online The position holder for that fuel is liable for the tax. 1040ez filing online Two-party exchanges. 1040ez filing online   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 1040ez filing online A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 1040ez filing online The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 1040ez filing online The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. 1040ez filing online The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 1040ez filing online The transaction is subject to a written contract. 1040ez filing online Terminal operator's liability. 1040ez filing online   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). 1040ez filing online   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. 1040ez filing online However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. 1040ez filing online The terminal operator is a registrant. 1040ez filing online The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. 1040ez filing online The terminal operator has no reason to believe any information on the certificate is false. 1040ez filing online Removal from refinery. 1040ez filing online   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. 1040ez filing online It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 1040ez filing online It is made at the refinery rack. 1040ez filing online The refiner is liable for the tax. 1040ez filing online Exception. 1040ez filing online   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. 1040ez filing online The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 1040ez filing online The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 1040ez filing online The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. 1040ez filing online Entry into the United States. 1040ez filing online   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. 1040ez filing online It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 1040ez filing online It is not made by bulk transfer. 1040ez filing online The enterer is liable for the tax. 1040ez filing online Importer of record's liability. 1040ez filing online   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 1040ez filing online   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 1040ez filing online The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. 1040ez filing online The importer of record has no reason to believe any information in the certificate is false. 1040ez filing online Customs bond. 1040ez filing online   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 1040ez filing online Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 1040ez filing online   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. 1040ez filing online The position holder is liable for the tax. 1040ez filing online The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 1040ez filing online However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 1040ez filing online Bulk transfers not received at approved terminal or refinery. 1040ez filing online   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. 1040ez filing online No tax was previously imposed (as discussed earlier) on any of the following events. 1040ez filing online The removal from the refinery. 1040ez filing online The entry into the United States. 1040ez filing online The removal from a terminal by an unregistered position holder. 1040ez filing online Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). 1040ez filing online   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. 1040ez filing online However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 1040ez filing online The owner is a registrant. 1040ez filing online The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. 1040ez filing online The owner has no reason to believe any information on the certificate is false. 1040ez filing online The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. 1040ez filing online The operator is jointly and severally liable if the owner does not meet these conditions. 1040ez filing online Sales to unregistered person. 1040ez filing online   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. 1040ez filing online   The seller is liable for the tax. 1040ez filing online However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 1040ez filing online The seller is a registrant. 1040ez filing online The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. 1040ez filing online The seller has no reason to believe any information on the certificate is false. 1040ez filing online The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. 1040ez filing online The buyer is jointly and severally liable if the seller does not meet these conditions. 1040ez filing online Exception. 1040ez filing online   The tax does not apply to a sale if all of the following apply. 1040ez filing online The buyer's principal place of business is not in the United States. 1040ez filing online The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 1040ez filing online The seller is a registrant and the exporter of record. 1040ez filing online The fuel was exported. 1040ez filing online Removal or sale of blended diesel fuel or kerosene. 1040ez filing online   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. 1040ez filing online Blended taxable fuel produced using biodiesel is subject to the tax. 1040ez filing online See Blended taxable fuel under Definitions, earlier. 1040ez filing online   The blender is liable for the tax. 1040ez filing online The tax is figured on the number of gallons not previously subject to the tax. 1040ez filing online   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. 1040ez filing online Generally, the biodiesel mixture must be diesel fuel (defined earlier). 1040ez filing online See Form 720 to report this tax. 1040ez filing online You also must be registered by the IRS as a blender. 1040ez filing online See Form 637 for more information. 1040ez filing online   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 1040ez filing online Additional persons liable. 1040ez filing online   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. 1040ez filing online Credits or Refunds. 1040ez filing online   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. 1040ez filing online For more information, see chapter 2. 1040ez filing online Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. 1040ez filing online 001 per gallon LUST tax as discussed below, unless the fuel is for export. 1040ez filing online The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. 1040ez filing online The person otherwise liable for tax (for example, the position holder) is a registrant. 1040ez filing online In the case of a removal from a terminal, the terminal is an approved terminal. 1040ez filing online The diesel fuel or kerosene satisfies the dyeing requirements (described next). 1040ez filing online Dyeing requirements. 1040ez filing online   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. 1040ez filing online It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. 1040ez filing online 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. 1040ez filing online Is indelibly dyed by mechanical injection. 1040ez filing online See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. 1040ez filing online Notice required. 1040ez filing online   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. 1040ez filing online   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. 1040ez filing online   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). 1040ez filing online That seller is subject to the penalty described next. 1040ez filing online Penalty. 1040ez filing online   A penalty is imposed on a person if any of the following situations apply. 1040ez filing online Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. 1040ez filing online Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. 1040ez filing online The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. 1040ez filing online The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. 1040ez filing online   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. 1040ez filing online After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. 1040ez filing online   This penalty is in addition to any tax imposed on the fuel. 1040ez filing online   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. 1040ez filing online   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. 1040ez filing online   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. 1040ez filing online However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. 1040ez filing online The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. 1040ez filing online Exception to penalty. 1040ez filing online   The penalty under item (3) will not apply in any of the following situations. 1040ez filing online Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. 1040ez filing online Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. 1040ez filing online The alteration or attempted alteration occurs in an exempt area of Alaska. 1040ez filing online See Removal for sale or use in Alaska, later. 1040ez filing online Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. 1040ez filing online Alaska and Feedstocks Tax of $. 1040ez filing online 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). 1040ez filing online Undyed kerosene used for feedstock purposes. 1040ez filing online Removal for sale or use in Alaska. 1040ez filing online   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. 1040ez filing online The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. 1040ez filing online The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. 1040ez filing online In the case of a removal from a terminal, the terminal is an approved terminal. 1040ez filing online The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. 1040ez filing online   If all three of the requirements above are not met, then tax is imposed at $. 1040ez filing online 244 per gallon. 1040ez filing online   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. 1040ez filing online Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. 1040ez filing online Later sales. 1040ez filing online   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. 1040ez filing online The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. 1040ez filing online However, the sale is not taxable (other than the LUST tax at $. 1040ez filing online 001 per gallon) if all the following requirements are met. 1040ez filing online The fuel is sold in Alaska for certain nontaxable uses. 1040ez filing online The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. 1040ez filing online The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. 1040ez filing online Feedstock purposes. 1040ez filing online   The $. 1040ez filing online 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. 1040ez filing online The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. 1040ez filing online In the case of a removal from a terminal, the terminal is an approved terminal. 1040ez filing online Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. 1040ez filing online   If all of the requirements above are not met, then tax is imposed at $. 1040ez filing online 244 per gallon. 1040ez filing online   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. 1040ez filing online For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. 1040ez filing online A feedstock user is a person that uses kerosene for a feedstock purpose. 1040ez filing online A registered feedstock user is a person that has been registered by the IRS as a feedstock user. 1040ez filing online See Registration Requirements, earlier. 1040ez filing online Later sales. 1040ez filing online   The excise tax ($. 1040ez filing online 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. 1040ez filing online The tax is imposed at the time of the later sale and that seller is liable for the tax. 1040ez filing online Certificate. 1040ez filing online   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. 1040ez filing online The certificate may be included as part of any business records normally used for a sale. 1040ez filing online A model certificate is shown in the Appendix as Model Certificate G. 1040ez filing online Your certificate must contain all information necessary to complete the model. 1040ez filing online   A certificate expires on the earliest of the following dates. 1040ez filing online The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040ez filing online The date the seller is provided a new certificate or notice that the current certificate is invalid. 1040ez filing online The date the seller is notified the buyer's registration has been revoked or suspended. 1040ez filing online   The buyer must provide a new certificate if any information on a certificate has changed. 1040ez filing online Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. 1040ez filing online Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. 1040ez filing online Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. 1040ez filing online Any liquid other than gasoline, diesel fuel, or kerosene. 1040ez filing online Generally, this back-up tax is imposed at a rate of $. 1040ez filing online 244 per gallon. 1040ez filing online Liability for tax. 1040ez filing online   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. 1040ez filing online In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. 1040ez filing online Exemptions from the back-up tax. 1040ez filing online   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. 1040ez filing online   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. 1040ez filing online Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 1040ez filing online A reduced tax rate of $. 1040ez filing online 198 per gallon is imposed on a diesel-water fuel emulsion. 1040ez filing online To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. 1040ez filing online If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. 1040ez filing online 244 per gallon. 1040ez filing online Credits or refunds. 1040ez filing online   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. 1040ez filing online Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. 1040ez filing online 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). 1040ez filing online For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. 1040ez filing online 219. 1040ez filing online The rate of $. 1040ez filing online 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. 1040ez filing online The airport terminal does not need to be a secured airport terminal for this rate to apply. 1040ez filing online However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. 1040ez filing online For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. 1040ez filing online 044 per gallon. 1040ez filing online For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. 1040ez filing online 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. 1040ez filing online See Terminal located within a secured area of an airport, later. 1040ez filing online In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 1040ez filing online For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. 1040ez filing online 001. 1040ez filing online There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 1040ez filing online The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. 1040ez filing online See Terminal located within a secured area of an airport, later. 1040ez filing online In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 1040ez filing online The position holder is liable for the $. 1040ez filing online 001 per gallon tax. 1040ez filing online For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. 1040ez filing online 141 per gallon applies. 1040ez filing online Certain refueler trucks, tankers, and tank wagons treated as terminals. 1040ez filing online   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. 1040ez filing online Such terminal is located within an area of an airport. 1040ez filing online Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. 1040ez filing online Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. 1040ez filing online The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. 1040ez filing online Information reporting will be required by terminal operators regarding this provision. 1040ez filing online Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. 1040ez filing online Terminal located within a secured area of an airport. 1040ez filing online   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. 1040ez filing online This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. 1040ez filing online Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. 1040ez filing online 044 per gallon. 1040ez filing online However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). 1040ez filing online For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. 1040ez filing online For the aircraft operator to be liable for the tax $. 1040ez filing online 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. 1040ez filing online Commercial aviation. 1040ez filing online   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. 1040ez filing online However, commercial aviation does not include any of the following uses. 1040ez filing online Any use exclusively for the purpose of skydiving. 1040ez filing online Certain air transportation by seaplane. 1040ez filing online See Seaplanes under Transportation of Persons by Air in chapter 4. 1040ez filing online Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. 1040ez filing online For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. 1040ez filing online Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. 1040ez filing online For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. 1040ez filing online Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. 1040ez filing online See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. 1040ez filing online Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. 1040ez filing online 141 per gallon. 1040ez filing online The fractional ownership program manager is liable for the tax. 1040ez filing online The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. 1040ez filing online If the surtax is imposed, the following air transportation taxes do not apply. 1040ez filing online Transportation of persons by air. 1040ez filing online Transportation of property by air. 1040ez filing online Use of international air travel facilities. 1040ez filing online These taxes are described under Air Transportation Taxes, later. 1040ez filing online A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. 1040ez filing online Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. 1040ez filing online Fractional program aircraft. 1040ez filing online   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. 1040ez filing online S. 1040ez filing online   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. 1040ez filing online In such situations, the flight is not commercial aviation. 1040ez filing online Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. 1040ez filing online Fractional owner. 1040ez filing online   Any person owning any interest (including the entire interest) in a fractional program aircraft. 1040ez filing online Dry lease aircraft exchange. 1040ez filing online   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. 1040ez filing online Special rule relating to deadhead service. 1040ez filing online   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. 1040ez filing online More information. 1040ez filing online   See section 4043 for more information on the surtax. 1040ez filing online Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. 1040ez filing online Certificate. 1040ez filing online   The certificate may be included as part of any business records normally used for a sale. 1040ez filing online See Model Certificate K in the Appendix. 1040ez filing online   A certificate expires on the earliest of the following dates. 1040ez filing online The date 1 year after the effective date (not earlier than the date signed) of the certificate. 1040ez filing online The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. 1040ez filing online The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. 1040ez filing online   The buyer must provide a new certificate if any information on a certificate has changed. 1040ez filing online   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. 1040ez filing online Exempt use. 1040ez filing online   The rate on kerosene for use in aviation is $. 1040ez filing online 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. 1040ez filing online An exempt use includes kerosene for the exclusive use of a state or local government. 1040ez filing online There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 1040ez filing online Flash title transaction. 1040ez filing online   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. 1040ez filing online In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. 1040ez filing online In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. 1040ez filing online Reseller statement. 1040ez filing online   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. 1040ez filing online Credits or Refunds. 1040ez filing online   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). 1040ez filing online A claim may be made by a registered ultimate vendor for certain sales. 1040ez filing online For more information, see chapter 2. 1040ez filing online Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. 1040ez filing online Other Fuels include alternative fuels. 1040ez filing online Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. 1040ez filing online Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. 1040ez filing online Qualified methanol and ethanol fuels. 1040ez filing online   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. 1040ez filing online The tax rates are listed in the Instructions for Form 720. 1040ez filing online Partially exempt methanol and ethanol fuels. 1040ez filing online   A reduced tax rate applies to these fuels. 1040ez filing online Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. 1040ez filing online The tax rates are listed in the Instructions for Form 720. 1040ez filing online Motor vehicles. 1040ez filing online   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. 1040ez filing online They are propelled by a motor. 1040ez filing online They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t
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1040ez filing online 6. 1040ez filing online   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. 1040ez filing online Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. 1040ez filing online Also use basis to figure depreciation, amortization, depletion, and casualty losses. 1040ez filing online If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. 1040ez filing online Only the basis allocated to the business or investment use of the property can be depreciated. 1040ez filing online Your original basis in property is adjusted (increased or decreased) by certain events. 1040ez filing online For example, if you make improvements to the property, increase your basis. 1040ez filing online If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. 1040ez filing online Keep accurate records of all items that affect the basis of your assets. 1040ez filing online For information on keeping records, see chapter 1. 1040ez filing online Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. 1040ez filing online Cost Basis The basis of property you buy is usually its cost. 1040ez filing online Cost is the amount you pay in cash, debt obligations, other property, or services. 1040ez filing online Your cost includes amounts you pay for sales tax, freight, installation, and testing. 1040ez filing online The basis of real estate and business assets will include other items, discussed later. 1040ez filing online Basis generally does not include interest payments. 1040ez filing online However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. 1040ez filing online You also may have to capitalize (add to basis) certain other costs related to buying or producing property. 1040ez filing online Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. 1040ez filing online Loans with low or no interest. 1040ez filing online   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. 1040ez filing online You generally have unstated interest if your interest rate is less than the applicable federal rate. 1040ez filing online See the discussion of unstated interest in Publication 537, Installment Sales. 1040ez filing online Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. 1040ez filing online If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. 1040ez filing online Some of these expenses are discussed next. 1040ez filing online Lump sum purchase. 1040ez filing online   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. 1040ez filing online Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. 1040ez filing online Figure the basis of each asset by multiplying the lump sum by a fraction. 1040ez filing online The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. 1040ez filing online Fair market value (FMV). 1040ez filing online   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 1040ez filing online Sales of similar property on or about the same date may help in figuring the FMV of the property. 1040ez filing online If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. 1040ez filing online Real estate taxes. 1040ez filing online   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. 1040ez filing online   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. 1040ez filing online Whether or not you reimburse the seller, do not include that amount in the basis of your property. 1040ez filing online Settlement costs. 1040ez filing online   Your basis includes the settlement fees and closing costs for buying the property. 1040ez filing online See Publication 551 for a detailed list of items you can and cannot include in basis. 1040ez filing online   Do not include fees and costs for getting a loan on the property. 1040ez filing online Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 1040ez filing online Points. 1040ez filing online   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. 1040ez filing online You may be able to deduct the points currently or over the term of the loan. 1040ez filing online For more information about deducting points, see Points in chapter 4 of Publication 535. 1040ez filing online Assumption of a mortgage. 1040ez filing online   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. 1040ez filing online Example. 1040ez filing online If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. 1040ez filing online Constructing assets. 1040ez filing online   If you build property or have assets built for you, your expenses for this construction are part of your basis. 1040ez filing online Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. 1040ez filing online   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. 1040ez filing online You must capitalize them (include them in the asset's basis). 1040ez filing online Employee wages paid for the construction work, reduced by any employment credits allowed. 1040ez filing online Depreciation on equipment you own while it is used in the construction. 1040ez filing online Operating and maintenance costs for equipment used in the construction. 1040ez filing online The cost of business supplies and materials used in the construction. 1040ez filing online    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. 1040ez filing online Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. 1040ez filing online To determine the basis of these assets or separate items, there must be an allocation of basis. 1040ez filing online Group of assets acquired. 1040ez filing online   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. 1040ez filing online Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. 1040ez filing online You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. 1040ez filing online If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. 1040ez filing online Farming business acquired. 1040ez filing online   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. 1040ez filing online Generally, reduce the purchase price by any cash received. 1040ez filing online Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. 1040ez filing online See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. 1040ez filing online Transplanted embryo. 1040ez filing online   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. 1040ez filing online Allocate the rest of the purchase price to the basis of the calf. 1040ez filing online Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. 1040ez filing online Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. 1040ez filing online You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 1040ez filing online Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. 1040ez filing online However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. 1040ez filing online You produce property if you construct, build, install, manufacture, develop, improve, or create the property. 1040ez filing online You are not subject to the uniform capitalization rules if the property is produced for personal use. 1040ez filing online In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. 1040ez filing online Plants. 1040ez filing online   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. 1040ez filing online Animals. 1040ez filing online   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. 1040ez filing online The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. 1040ez filing online Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. 1040ez filing online For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. 1040ez filing online For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. 1040ez filing online Exceptions. 1040ez filing online   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. 1040ez filing online   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. 1040ez filing online See Accrual Method Required under Accounting Methods in chapter 2. 1040ez filing online   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. 1040ez filing online If you make this election, special rules apply. 1040ez filing online This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. 1040ez filing online This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. 1040ez filing online    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. 1040ez filing online See chapter 7, for additional information on depreciation. 1040ez filing online Example. 1040ez filing online You grow trees that have a preproductive period of more than 2 years. 1040ez filing online The trees produce an annual crop. 1040ez filing online You are an individual and the uniform capitalization rules apply to your farming business. 1040ez filing online You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. 1040ez filing online You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. 1040ez filing online Preproductive period of more than 2 years. 1040ez filing online   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. 1040ez filing online Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. 1040ez filing online Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. 1040ez filing online More information. 1040ez filing online   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. 1040ez filing online 263A-4. 1040ez filing online Table 6-1. 1040ez filing online Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. 1040ez filing online Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. 1040ez filing online The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. 1040ez filing online Increases to Basis Increase the basis of any property by all items properly added to a capital account. 1040ez filing online These include the cost of any improvements having a useful life of more than 1 year. 1040ez filing online The following costs increase the basis of property. 1040ez filing online The cost of extending utility service lines to property. 1040ez filing online Legal fees, such as the cost of defending and perfecting title. 1040ez filing online Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. 1040ez filing online Assessments for items such as paving roads and building ditches that increase the value of the property assessed. 1040ez filing online Do not deduct these expenses as taxes. 1040ez filing online However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. 1040ez filing online If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. 1040ez filing online See chapter 7. 1040ez filing online Deducting vs. 1040ez filing online capitalizing costs. 1040ez filing online   Do not add to your basis costs you can deduct as current expenses. 1040ez filing online For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. 1040ez filing online However, you can elect either to deduct or to capitalize certain other costs. 1040ez filing online See chapter 7 in Publication 535. 1040ez filing online Decreases to Basis The following are some items that reduce the basis of property. 1040ez filing online Section 179 deduction. 1040ez filing online Deductions previously allowed or allowable for amortization, depreciation, and depletion. 1040ez filing online Alternative motor vehicle credit. 1040ez filing online See Form 8910. 1040ez filing online Alternative fuel vehicle refueling property credit. 1040ez filing online See Form 8911. 1040ez filing online Residential energy efficient property credits. 1040ez filing online See Form 5695. 1040ez filing online Investment credit (part or all) taken. 1040ez filing online Casualty and theft losses and insurance reimbursements. 1040ez filing online Payments you receive for granting an easement. 1040ez filing online Exclusion from income of subsidies for energy conservation measures. 1040ez filing online Certain canceled debt excluded from income. 1040ez filing online Rebates from a manufacturer or seller. 1040ez filing online Patronage dividends received from a cooperative association as a result of a purchase of property. 1040ez filing online See Patronage Dividends in chapter 3. 1040ez filing online Gas-guzzler tax. 1040ez filing online See Form 6197. 1040ez filing online Some of these items are discussed next. 1040ez filing online For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. 1040ez filing online Depreciation and section 179 deduction. 1040ez filing online   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. 1040ez filing online For more information on these deductions, see chapter 7. 1040ez filing online Section 179 deduction. 1040ez filing online   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. 1040ez filing online Depreciation. 1040ez filing online   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. 1040ez filing online If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. 1040ez filing online If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. 1040ez filing online   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. 1040ez filing online   See chapter 7 for information on figuring the depreciation you should have claimed. 1040ez filing online   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. 1040ez filing online Casualty and theft losses. 1040ez filing online   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. 1040ez filing online Also, decrease it by any deductible loss not covered by insurance. 1040ez filing online See chapter 11 for information about figuring your casualty or theft loss. 1040ez filing online   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. 1040ez filing online To make this determination, compare the repaired property to the property before the casualty. 1040ez filing online Easements. 1040ez filing online   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. 1040ez filing online It reduces the basis of the affected part of the property. 1040ez filing online If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. 1040ez filing online See Easements and rights-of-way in chapter 3. 1040ez filing online Exclusion from income of subsidies for energy conservation measures. 1040ez filing online   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. 1040ez filing online Reduce the basis of the property by the excluded amount. 1040ez filing online Canceled debt excluded from income. 1040ez filing online   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. 1040ez filing online A debt includes any indebtedness for which you are liable or which attaches to property you hold. 1040ez filing online   You can exclude your canceled debt from income if the debt is any of the following. 1040ez filing online Debt canceled in a bankruptcy case or when you are insolvent. 1040ez filing online Qualified farm debt. 1040ez filing online Qualified real property business debt (provided you are not a C corporation). 1040ez filing online Qualified principal residence indebtedness. 1040ez filing online Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. 1040ez filing online If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. 1040ez filing online If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. 1040ez filing online   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. 1040ez filing online For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. 1040ez filing online For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. 1040ez filing online For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. 1040ez filing online Basis Other Than Cost There are times when you cannot use cost as basis. 1040ez filing online In these situations, the fair market value or the adjusted basis of property may be used. 1040ez filing online Examples are discussed next. 1040ez filing online Property changed from personal to business or rental use. 1040ez filing online   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. 1040ez filing online An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. 1040ez filing online   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. 1040ez filing online   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. 1040ez filing online The basis for figuring a gain is your adjusted basis in the property when you sell the property. 1040ez filing online Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. 1040ez filing online Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . 1040ez filing online Property received for services. 1040ez filing online   If you receive property for services, include the property's FMV in income. 1040ez filing online The amount you include in income becomes your basis. 1040ez filing online If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. 1040ez filing online Example. 1040ez filing online George Smith is an accountant and also operates a farming business. 1040ez filing online George agreed to do some accounting work for his neighbor in exchange for a dairy cow. 1040ez filing online The accounting work and the cow are each worth $1,500. 1040ez filing online George must include $1,500 in income for his accounting services. 1040ez filing online George's basis in the cow is $1,500. 1040ez filing online Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. 1040ez filing online A taxable gain or deductible loss also is known as a recognized gain or loss. 1040ez filing online A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. 1040ez filing online If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. 1040ez filing online Example. 1040ez filing online You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. 1040ez filing online You must report a taxable gain of $4,000 for the land. 1040ez filing online The tractor has a basis of $6,000. 1040ez filing online Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. 1040ez filing online Similar or related property. 1040ez filing online   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. 1040ez filing online However, make the following adjustments. 1040ez filing online Decrease the basis by the following amounts. 1040ez filing online Any loss you recognize on the involuntary conversion. 1040ez filing online Any money you receive that you do not spend on similar property. 1040ez filing online Increase the basis by the following amounts. 1040ez filing online Any gain you recognize on the involuntary conversion. 1040ez filing online Any cost of acquiring the replacement property. 1040ez filing online Money or property not similar or related. 1040ez filing online   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. 1040ez filing online Allocating the basis. 1040ez filing online   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. 1040ez filing online Basis for depreciation. 1040ez filing online   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. 1040ez filing online For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 1040ez filing online For more information about involuntary conversions, see chapter 11. 1040ez filing online Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. 1040ez filing online A nontaxable gain or loss also is known as an unrecognized gain or loss. 1040ez filing online If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. 1040ez filing online Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. 1040ez filing online For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. 1040ez filing online There must also be an exchange of like-kind property. 1040ez filing online For more information, see Like-Kind Exchanges in  chapter 8. 1040ez filing online The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. 1040ez filing online Example 1. 1040ez filing online You traded a truck you used in your farming business for a new smaller truck to use in farming. 1040ez filing online The adjusted basis of the old truck was $10,000. 1040ez filing online The FMV of the new truck is $30,000. 1040ez filing online Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. 1040ez filing online Example 2. 1040ez filing online You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). 1040ez filing online You use both the field cultivator and the planter in your farming business. 1040ez filing online The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. 1040ez filing online   Exchange expenses generally are the closing costs that you pay. 1040ez filing online They include such items as brokerage commissions, attorney fees, and deed preparation fees. 1040ez filing online Add them to the basis of the like-kind property you receive. 1040ez filing online Property plus cash. 1040ez filing online   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. 1040ez filing online Example. 1040ez filing online You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. 1040ez filing online Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). 1040ez filing online Special rules for related persons. 1040ez filing online   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. 1040ez filing online Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. 1040ez filing online Each person reports it on the tax return filed for the year in which the later disposition occurred. 1040ez filing online If this rule applies, the basis of the property received in the original exchange will be its FMV. 1040ez filing online For more information, see chapter 8. 1040ez filing online Exchange of business property. 1040ez filing online   Exchanging the property of one business for the property of another business generally is a multiple property exchange. 1040ez filing online For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. 1040ez filing online Basis for depreciation. 1040ez filing online   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. 1040ez filing online For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 1040ez filing online Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. 1040ez filing online The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. 1040ez filing online Decrease the basis by the following amounts. 1040ez filing online Any money you receive. 1040ez filing online Any loss you recognize on the exchange. 1040ez filing online Increase the basis by the following amounts. 1040ez filing online Any additional costs you incur. 1040ez filing online Any gain you recognize on the exchange. 1040ez filing online If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. 1040ez filing online Example 1. 1040ez filing online You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. 1040ez filing online You realize a gain of $40,000. 1040ez filing online This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). 1040ez filing online Include your gain in income (recognize gain) only to the extent of the cash received. 1040ez filing online Your basis in the land you received is figured as follows. 1040ez filing online Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. 1040ez filing online You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. 1040ez filing online You realize a gain of $7,250. 1040ez filing online This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). 1040ez filing online You include all the gain in your income (recognize gain) because the gain is less than the cash you received. 1040ez filing online Your basis in the truck you received is figured as follows. 1040ez filing online Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. 1040ez filing online   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. 1040ez filing online The rest is the basis of the like-kind property. 1040ez filing online Example. 1040ez filing online You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. 1040ez filing online You also received $1,000 cash and a truck that had an FMV of $3,000. 1040ez filing online The truck is unlike property. 1040ez filing online You realized a gain of $1,500. 1040ez filing online This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). 1040ez filing online You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. 1040ez filing online Your basis in the properties you received is figured as follows. 1040ez filing online Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). 1040ez filing online This is the truck's FMV. 1040ez filing online The rest ($12,500) is the basis of the tractor. 1040ez filing online Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. 1040ez filing online Example. 1040ez filing online You used a tractor on your farm for 3 years. 1040ez filing online Its adjusted basis is $22,000 and its FMV is $40,000. 1040ez filing online You are interested in a new tractor, which sells for $60,000. 1040ez filing online Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. 1040ez filing online Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). 1040ez filing online However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. 1040ez filing online Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). 1040ez filing online Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. 1040ez filing online Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. 1040ez filing online You also must know its FMV at the time it was given to you and any gift tax paid on it. 1040ez filing online FMV equal to or greater than donor's adjusted basis. 1040ez filing online   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. 1040ez filing online Increase your basis by all or part of any gift tax paid, depending on the date of the gift. 1040ez filing online   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. 1040ez filing online See Adjusted Basis , earlier. 1040ez filing online   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. 1040ez filing online Figure the increase by multiplying the gift tax paid by the following fraction. 1040ez filing online Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. 1040ez filing online The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 1040ez filing online Example. 1040ez filing online In 2013, you received a gift of property from your mother that had an FMV of $50,000. 1040ez filing online Her adjusted basis was $20,000. 1040ez filing online The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). 1040ez filing online She paid a gift tax of $7,320. 1040ez filing online Your basis, $26,076, is figured as follows. 1040ez filing online Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . 1040ez filing online 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. 1040ez filing online If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. 1040ez filing online However, your basis cannot exceed the FMV of the gift when it was given to you. 1040ez filing online FMV less than donor's adjusted basis. 1040ez filing online   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. 1040ez filing online Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. 1040ez filing online Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. 1040ez filing online (See Adjusted Basis , earlier. 1040ez filing online )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. 1040ez filing online Example. 1040ez filing online You received farmland as a gift from your parents when they retired from farming. 1040ez filing online At the time of the gift, the land had an FMV of $80,000. 1040ez filing online Your parents' adjusted basis was $100,000. 1040ez filing online After you received the land, no events occurred that would increase or decrease your basis. 1040ez filing online If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. 1040ez filing online If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. 1040ez filing online If the sales price is between $80,000 and $100,000, you have neither gain nor loss. 1040ez filing online For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. 1040ez filing online If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. 1040ez filing online Business property. 1040ez filing online   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. 1040ez filing online Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. 1040ez filing online The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. 1040ez filing online However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. 1040ez filing online The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. 1040ez filing online For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. 1040ez filing online Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. 1040ez filing online If a federal estate return is filed, you can use its appraised value. 1040ez filing online The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. 1040ez filing online For information on the alternate valuation, see the Instructions for Form 706. 1040ez filing online The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. 1040ez filing online If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. 1040ez filing online Special-use valuation method. 1040ez filing online   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. 1040ez filing online If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. 1040ez filing online If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. 1040ez filing online The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. 1040ez filing online   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. 1040ez filing online Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. 1040ez filing online Figure all FMVs without regard to the special-use valuation. 1040ez filing online   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. 1040ez filing online This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. 1040ez filing online The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. 1040ez filing online   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. 1040ez filing online To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. 1040ez filing online If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. 1040ez filing online The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. 1040ez filing online   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. 1040ez filing online   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. 1040ez filing online Property inherited from a decedent who died in 2010. 1040ez filing online   If you inherited property from a decedent who died in 2010, different rules may apply. 1040ez filing online See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. 1040ez filing online Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. 1040ez filing online Partner's basis. 1040ez filing online   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. 1040ez filing online 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. 1040ez filing online For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. 1040ez filing online Shareholder's basis. 1040ez filing online   The basis of property distributed by a corporation to a shareholder is its fair market value. 1040ez filing online For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. 1040ez filing online Prev  Up  Next   Home   More Online Publications